A Research On Legal Issues Of The Protection Of Fund Holders' Interests

Fund centralizes the public asset and converts the savings to the investment by expert financial management and investment diversification to meet the investors'needs of the asset increment. Because of the numerous investors, the function of the fund market is not only concerned with the increment of the fund share but also the social justice and safety. Therefore, the protection of the fund holders is the cornerstone of the fund industry and the core of the relevant legal systems. And it's significative to study the issue of the protection of the fund holders'interests in contractual fund in China.There are four parts in the thesis.The first part demonstrates the legal status of the fund holders. The essence of the fund is the trust relationship, which is the foundation of building the protective mechanism of the fund holders. In the fund relationship, the fund holders are the trustor and beneficiary, and the fund manager and the fund custodian are the trustees. In the mode of contractual fund, the fund holders are made to be one party of the contract via series of arrangement. Hence, to clarify the legal status of the fund holders as one party of the contract helps to define the rights and obligations among the fund holders, fund manager and fund custodian; this is closely related to the protection of fund holders'interests.The second part introduces the legal systems to protect the fund holders'interests. The issue of protection of the fund holders'interests in contractual fund is also that of the balance of power among the fund holders, fund manager and fund custodian. Broadly speaking, fund governance refers to a complete set of the legal systems, including how to control and assign the risks and interests among different parties and who will do this. To provide the comprehensive protection to the fund holders, two parts should be included in fund governance: internal governance structure and external supervision mechanism. Firstly, the internal governance structure is the right-and-obligations relationship among fund holders, the fund manager and fund custodian. As the trustor and beneficiary, fund holders have the beneficial right of the fund asset, the right to claim for remedy in the case that the fund contracts were breached and the supervisory right of the fund affairs. While, as one party of the fund contracts, the fund holders also bear the relevant obligations, such as to perform the contract, pay the subscription and other fee, bear the limited responsibility when the fund runs at a loss or it is terminated and do nothing include damage other fund holders and the fund itself. The fund manager, as the participant of the operation and management of the fund asset, exists in the core of the whole fund system. On the one hand, in order to stimulate the fund manager to strive for the maximal invest profit, the manager should be granted relevant power to run and manage the fund asset. However, on the other hand, the broad discretionary power of fund manager may impair the fund holders'interest for the interest of the manager's own. Thereby, the manager should be restricted by his obligations. The fund custodian takes the important responsibility of overseeing the running of the fund, which is a right if it were put into the relationship between the fund custodian and fund manager but an obligation between fund custodian and fund holders. The fund custodian takes the important responsibility of overseeing the running of the fund, which is a right if it were put into the relationship between the fund custodian and fund manager but an obligation between the fund custodian and the fund holders. Secondly, the external supervisory mechanism refers to the administration by the government and the supervision by self-discipline organizations of the fund industry. The government can take full advantage of their authority to implement overall administration of each link effectively and attach importance to the interests of fund holders. The self-discipline organizations of the fund industry can use their advantages of flexibility and advance prevention to carry out day-to-day supervision as a necessary complement to government administration.The third part points out some problems about the fund industry. Judging from current situation of the operation of the fund in China, the relative legal systems have not been satisfying yet, no matter the external supervision mechanism or internal governance structure. Lots of problems still exist, such as the absence of the representative of the fund holders, the useless fund holders meeting, little restraint to the fund manager, the serious related transactions, the fund custodian lacking independence, ineffective supervision, rigid government supervision and insufficient self-discipline, etc.. These shortcomings cause the interests of the fund holders vulnerable to damage. Therefore, under the premise of considering the affordability of fund industry and the development of the market in china, we should fully use other countries and regions'experience for reference to improve our legal system in order to provide a comprehensive protection for the fund holders.The fourth part presents several suggestions to improve the legal systems of the protection of the fund holders. Firstly, to establishment of stringent internal governance structure is important. The fund holders meeting should be improved to urge fund holders better participate in the fund's decision-making; and setting up a standing committee of the fund holders meeting to ensure the day-to-day supervision is needed. We should clarify the care duty and the loyal duty of the fund manager and strictly control the related transaction. Then, we should strengthen the independence of the fund custodian and refining their supervision responsibilities. Secondly, it's important to improve the external supervision mechanisms. Government should improve the effect level of the relevant regulations, exert the appropriate supervision. The industry self-disciplinary organizations should keep their independence and refine the detail of supervision.