Investors In Asset Securitization: Study On Interest Protection Mechanism

Compared with traditional banking loan, asset securitization as a direct means of financing has its conspicuous advantage in addressing non-performing loaning in the bank and loaning difficulties for the small-and medium-sized enterprises. Asset securitization was initiated in the United States during the 1970s and was swiftly spread to other developed societies such as Europe and Japan. As the biggest creature of finance industry over late 20th century, asset securitization has become one of the major financing means. China's first pilot project of asset securitization started in March 2005, after years of theoretical studies.The development of asset securitization relies heavily upon the confidence of it from the investors, otherwise the market would fall into a world ruled by jungle principles. In this world, no one would eventually benefit from this anarchy, not even the initiator of securitization. This dissertation explores the protection mechanism for the investors in the process of asset securitization with an aim to seek solution for the sound development of securitization market and contribute to building a law-ruled financial market in China. As to the protection of investors'benefit, this research is conducted from following aspects:the duty of information disclosure for initiator as they sell the assets; the legal structure of special purpose vehicle (SPV); the duty of information disclosure for SPVs; the risk isolation mechanism of SPV; the protection mechanism of investors'right to appeal.The first part discusses the significance of information disclosure duty in terms of protection of investors'benefit. The benefit of investors is based upon the assets. Considering the asymmetric information, the information disclosure from the initiator seems of vital importance. Introducing the legislation experience from Japan and Taiwan, this part discusses the scale and approaches of information disclosure, as well as the balance of interest between initiating creditors and investors.The second and third parts look into the information disclosure duty and risk isolation mechanism as to SPV. After the asset being transferred to SPV, the asset is under substantial control of SPV, thus information asymmetry occurs between inverstors and SPV. Introducing the legislation experiences in the United States, Japan, Taiwan and China, this part discusses the scale of SPV information disclosure, and risk isolation mechanism for SPV in forms of trust and corporation. Also this part discusses relations between bankruptcy and risk isolation mechanism.The fourth part discusses legal structure of SPV. Combinging foreign legislation experiences and China's specific situation, the author argues that reforms based on China's Corporation Law is needed with an aim to build SPVs that China need for its asset securitization development.The fifth and sixth parts analyze the risk monitoring and mechanism of safeguarding the right of appeal. The author argues that during the primitive period of asset securitization, the supervising body exerts great significance upon its development. These parts also analyze the existing problems and solutions within the supervising body. Another important issue addressed here is the investors'right of appeal. The author based on exiting legislature discusses the scale and approaches of appealing rights.The last part is conclusion, in which the viewpoints of the entire dissertation are summarized.