Legal Regulation On The Mis-selling Of Financial Products

At present, there are two of the major acts of mis-selling of financial products in China. The first is financial institutions violate the principle of suitability and recommend inappropriate financial products to the unsophisticated investors. The second is that financial institutions breach the duty of disclosure. The mis-selling of financial products have caused damage to unsophisticated investors.The article consists of four chapters as follows:The first chapter gives an introduction of the thesis. This chapter sets forth the description of financial products and unsophisticated investors. The scope of the discussion is limited to investment product. This chapter gives a general analysis of the mis-selling of financial products. The chapter points out that the regulation of sales of financial products is to protect the interests of unsophisticated investors.The second chapter analyzes suitability rules during the recommendation and marketing of financial products. First, this chapter defines the concept of suitability rules and discusses the significance of suitability rules. This chapter next introduces the development progress of suitability rules in US and Japan. Suitability rules have been used and developed by legislation and supervisory regulation. Suitability rules have become important legally biding rule which can effectively protect the interests of investors. The theoretic foundation of Suitability rules is the theory of fiduciary duty. This chapter also analyzes the content of suitability rules. Finally, this chapter gives an analysis of breach of financial institutions'suitability obligation and its legal results.The third chapter discusses financial institutions'duty of disclosure. First, this chapter sets forth the description of duty of disclosure. This chapter also discusses the theoretic foundation of duty of disclosure in contract making, and the contents include principle of good faith and collateral duty, theories of the protection of unsophisticated investor. This chapter also discusses the specific contents of the duty of disclosure which include the time, the method, the scope and the extent of performance of the duty of disclosure. This chapter also analyses the situation in which financial institutions are exempt from the duty of disclosure. Finally, This chapter describes the specific type of violation of the duty of disclosure and its legal effect.The fourth chapter introduces the principles of suitability and duty of disclosure of existing laws. This chapter proposes to regulate the mis-selling with the improvement of suitability rules, the improvement of the duty of disclosure, the establishment of investor classification system and building a unified code of conduct of financial products sales.