A Study On The Illegal Cost In Chinese Security Market

Fairness, impartiality and openness is the spirit of the Securities Law. However, in the current Chinese security market, the illegal behaviors like insider trading, false presentment, manipulation of market and cheating client etc are in vogue, which is a big gap to the spirit of Securities Law. Market economy is also fiduciary economy without which it will do harm to the investors' interests and their confidence on the security market. The chief aim of the Securities Law is to protect the investors against cheating and supply those who are cheated with the proper way to legal relief. For this reason, the supervising measures on the security market and the punishment on the illegal behaviors become more and more strict, which aims at improving the illegal cost, protecting the investors and keeping their confidence on the security market. To improve the illegal cost in the security market, we need the improvement of the legislation, supervision etc and at the same time create a sound environment of security market in which the good faith is the cornerstone. In this dissertation the writer analyzed the components of the illegal cost, the relationship between the illegal cost and punishment mechanism, the reason for the low illegal cost in Chinese security market and pointed out some countermeasures to improve the illegal cost in Chinese security market.The illegal cost in security market consists of illegal social cost, private cost and external cost. The private cost adds the external cost equals to the social cost. The external cost is the damages of the vast investors and the net lose of the society brought by the illegal behaviors in security market. The illegal private cost, which can be divided into the inevitable cost and possible cost, is the inevitable or possible consumption and opportunity cost of the lawbreakers. The inevitable cost is the necessary payment of the lawbreakers to implement the illegal behaviors. The possible cost which consists of legal cost, supervising cost and other cost is the possible cost of the lawbreakers when they carry out the illegal activities. Because the inevitable cost is fixed and actual, the illegal private cost in security market is mainly decided by the possible cost or the expected punished cost of the lawbreakers. The higher the possible cost, the higher the illegal private cost. The aim of Chinese legality improvement and supervision enhancement is to heighten the illegal private cost, narrow the gap between the private cost and social cost, that is to force the lawbreakers to bear the damages brought by the illegal behaviors and reduce the social net lose.There are two kinds of punishment on the illegal behaviors in Chinese security market, the punishment by the SEC and the punishment according to law. The punishment mechanism pursues two effects: one is to force the lawbreakers to bear the necessary punishment; the other is to force the potential lawbreakers not to implement the illegal behaviors anymore. That is punishment and menace. In order to obtain the two effects of punishment mechanism, it is necessary to combine the sternness, fixation and prompt punishment together. The expected punished cost is the product of the sternness and fixation of punishment. The same expected punished cost has different combination of sternness and fixation of punishment. Under the same fixed condition of punishment fixation, the prompt punishment also has great effect on the punishment mechanism.It is necessary to analyze illegal income when we speak of illegal cost because only on this basis can we analyze why the lawbreakers choose to carry out the illegal behaviors. The illegal environment of Chinese security market, the governance defect of the listed companies and the imperfection of the self-disciplining organization are the main factors which lead to the low inevitable illegal cost of the lawbreakers, and the security legislation and judicature problems, the supervision defect and the blocked channels to the supervision by the media and the masses...