Research On The Reconciliation System Of Securities Administrative Law Enforcement

The traditional securities supervision method has the characteristics of unilaterality,compulsion,command and authority.Although it can quickly maintain the regulatory order and achieve the public interest,it is also easy to damage the legitimate rights and interests of other entities such as administrative participants,resulting in market turmoil and disorder.In mature overseas markets,Securities Administrative Law Enforcement Settlement is often adopted,which better achieves the purpose of securities supervision and takes into account the protection of the interests of the counterparty.Securities Administrative Law Enforcement Settlement is a new type of securities supervision method that combines rigidity and flexibility.Its rigidity is reflected in the fact that the parties often need to pay a large settlement fee and perform strict compliance obligations at the expense of reaching a settlement agreement with the securities regulator.If the parties do not perform the settlement agreement,the securities regulator will resume the investigation and enforcement procedures in a timely manner.Its flexibility is reflected in the fact that it makes administrative decisions by means of concluding administrative agreements,which is a bilateral,noncompulsory means of law enforcement.Thus,Securities Administrative Law Enforcement Settlement reflects a major shift in the governance of the securities market from the traditional governance based on the single will of the securities regulator to the governance through negotiation,concession and compromise between the securities regulator and the regulated parties to reach an agreement.Based on the legitimacy of Securities Administrative Law Enforcement Settlement and its institutional advantages,China piloted the system in 2015.Then,Article 171 of China’s newly revised Securities Law in 2019 has also stipulated the system.However,up to now,the Securities Administrative Law Enforcement Settlement system is still a“new thing” in China,the academic research is still insufficient,the system norm is still lacking,and the preliminary pilot effect is still not as expected.In order to enrich the theoretical research and improve the practical effect of China’s Securities Administrative Law Enforcement Settlement system,this paper adopts a research approach from theory to practice,from overseas to domestic,and uses a variety of analytical methods such as normative analysis,comparative analysis,historical analysis,and practical analysis to analyze the Securities Administrative Law Enforcement Settlement in typical countries（regions）.This paper also reveals the current situation and problems of China’s Securities Administrative Law Enforcement Settlement system,and discuss the possible improvements.In terms of conceptual features,Securities Administrative Law Enforcement Settlement refers to the administrative law enforcement method in which the party under investigation promises to correct the suspected illegal behaviors,compensate for the loss of the relevant investors,eliminate the damage or adverse impact and is approved by the securities regulatory authority,and the securities regulatory authority terminates the investigation of the case after the party fulfills the promise.Article 171 of the Securities Law does not give a clear name to this system,and in order to avoid negative associations such as “lax law enforcement” and “exchange of interests” caused by the name “Securities Administrative Law Enforcement Settlement” to the public,and to reduce possible resistance to the implementation of the system,the administrative regulations and departmental rules issued by the State Council and the CSRC renamed this system “Commitment of parties to administrative law enforcement”.In this article,we believe that the name “Commitment of parties to administrative law enforcement” does not accurately reflect the essence of the system of settling enforcement disputes between securities regulators and the parties under investigation by way of settlement,and most of the mature markets overseas call this system “enforcement settlement” or “administrative settlement”.The name “Securities Administrative Settlement” is more appropriate.The rise and development of Securities Administrative Law Enforcement Settlement,which reflects the flexibility of securities regulators to dispose of their administrative discretion,is attributed to the reconceptualization and breakthrough of traditional administrative regulation and the theory of “administrative power not to be disposed of” by the jurisprudence,based on theories such as the theory of mobile rule of law,the theory of administrative discretion,the theory of public-private partnership governance and the theory of responsive regulation.Under the wave of “privatization of public law”,administrative enforcement conciliation has been gradually applied to public law enforcement activities such as environmental,energy regulation and anti-monopoly activities in Western countries,and China is also experimenting with administrative enforcement conciliation system in a small scale,and has established relevant systems in specific administrative fields such as anti-monopoly,anti-dumping and customs intellectual property protection.In terms of system structure,the Securities Administrative Law Enforcement Settlement system includes settlement conditions,subjects,authority,procedures,results,supervision and dispute resolution.In order to explain the ins and outs of the Securities Administrative Law Enforcement Settlement system,it is necessary to conduct research on the practice of settlement system in mature overseas markets.In extraterritorial markets,the Securities Administrative Law Enforcement Settlement system is the application of alternative dispute resolution methods in administrative procedures.This paper selects four common law countries（regions）such as the United States,the United Kingdom,Australia,and Chinese Hong Kong,and two civil law countries（regions）such as Germany and Chinese Taiwan from all over the world,and compares the basic structure and practical activities of their settlement system.The Securities Administrative Law Enforcement Settlement system of various countries（regions）can be divided into two parts: substance and procedure.The substantive content includes the applicable premise,applicable conditions,the rights and obligations of parties to the settlement,the content of the settlement decision,the management and use of the settlement fund,etc.,and the procedural content mainly includes the settlement application procedure,negotiation procedure,agreement conclusion procedure,information disclosure procedure,stakeholder protection procedure,and settlement obligation enforcement procedure,etc.In practice,the practice of Securities Administrative Law Enforcement Settlement varies in different countries（regions）.In countries（regions）where the applicable conditions are relaxed,administrative enforcement settlement can be used to deal with enforcement disputes as long as it can resolve the disputes and improve the efficiency of enforcement,and the settlement system is well developed in practice.In countries（regions）where the conditions for application are strict,settlements can only be applied to a limited number of situations,and the use of the settlement system is restricted.On the whole,the Securities Administrative Law Enforcement Settlement system in common law countries（regions）is more mature and established,and the practice is more active.China’s securities supervision and enforcement system embodies two major features: “Centralization and unification” and “separation of investigation and examination power”.The centralized and unified supervision institution,supervision authority and supervision method are in line with the reality of China’s securities market development,and the “separation of investigation and examination power” enables the SFC’s investigation and punishment powers to be mutually restrained,ensuring the fair,just and reasonable handling of cases.China’s Securities Administrative Law Enforcement Settlement system emerged from the State Council’s authorized exploration and practice,and has undergone a process of institutional evolution from“trial” by departmental regulations to formal incorporation into legal norms,with the system design reflecting the characteristics of “centralization and unification” and“separation of investigation and examination power”.As seen from the pilot regulations and practice,China’s Securities Administrative Law Enforcement Settlement system has problems such as overly strict conditions of application and the small number of cases settled by the settlement system,poor initiation of procedures and lack of protection of the parties’ rights to settlement,insufficient disclosure of settlement information and the need to improve the timeliness,low criminal prosecution standards leading to limited scope of application of the settlement system,and the unclear nature of settlement funds and the lack of uniform levy standards.After a series of legislation,China’s Securities Administrative Law Enforcement Settlement system has been significantly improved compared to that during the pilot implementation period,but there are still deficiencies in the conditions of application,application procedures,and the management and use of settlement funds.The implementation of settlement in China still faces a number of “Chineseization” problems,such as insufficient motivation to implement them,the failure to eliminate questions about their legitimacy,and the lack of coordination of the relevant investor protection system,leaving much room for further development of the system.It is necessary to find a path to break the problems of China’s Securities Administrative Law Enforcement Settlement system in terms of law enforcement philosophy,trust mechanism,motivation mechanism and procedural connections.In terms of enforcement philosophy,Securities Administrative Law Enforcement Settlement can promote optimal deterrence and improve the probability of discovery of securities violations in society on the whole.In terms of trust mechanisms,it is necessary to establish legislative,administrative and judicial controls on the use of discretionary powers of securities regulators to prevent the settlement system from being abused.In terms of motivation mechanism,it is necessary to create an organizational environment with strong incentives,taking into account a variety of enforcement incentives such as top-down enforcement assessment and bottom-up public recognition.In terms of institutional connection,it is necessary to co-ordinate the relationship between the Securities Administrative Law Enforcement Settlement system and various investor protection mechanisms such as early payment,civil securities litigation and ordered buy-backs,so as to form an orderly and cascading mechanism for pursuing responsibility and investor protection.The specific optimization of China’s Securities Administrative Law Enforcement Settlement system covers three aspects,including the establishment of principles,substantive mechanism and procedural mechanism.First,the principles of the Securities Administrative Law Enforcement Settlement system not only include the principle of voluntariness and equality in private law,but also the principle of trust on interests,public interest and proportionality in public law,which together constitute the foundation and guidance for the operation of the Securities Administrative Law Enforcement Settlement system.Secondly,the establishment of physical mechanism should focus on the premises and conditions of application of the settlement system,the content and potency of the settlement agreement,and the regulation and application of the settlement fund,etc.Among them,a system of acknowledgement of violation by the parties to the settlement can be explored on the premise of application.The application conditions should reflect the restorative,effective and efficient nature of the market;the content of the agreement should establish a model agreement mechanism and clarify the validity status of the agreement;and the settlement fund system should make overall arrangements for the collection,management and compensation.Thirdly,the establishment of procedural mechanism should highlight the requirements of due process of law.Among them,the starting procedure should focus on solving the problem of poor startup of the reconciliation procedure due to information asymmetry.The consultation procedure should adhere to the requirements of efficiency,standardization,equality and comprehensiveness.The decision-making procedure highlights the optimization of collective decision-making mechanisms and the establishment of corresponding quality control mechanisms.The implementation procedure actively explores the third-party expert supervision of implementation,judicial supervision of implementation and other diversified implementation mechanisms.The supervision procedure focuses on the optimization of the mechanisms of legislative supervision,administrative supervision and judicial supervision.The interest protection procedure starts from the parties’ right to remedy,information disclosure and public participation,and builds a comprehensive mechanism for protecting the interests of participants.