Study Of China's Securities Investment Fund Market, Legislative And Regulatory Issues

A full set of laws and regulations with strict regulatory compliance are the preconditions for the vigorous development of the sophisticated financial derivatives of modem mutual fund industry. The rapid development of the mutual fund industry in the United States has benefited considerably from such laws and regulations as the ecurities Law and the ecurities Trading Lawdopted after the Great Depression in the early 1930s with the investment Company Law- and the -Law on the Investment Advisorson particular that became enforced in year of 1940. These laws have played an important role in protecting the lawful rights of the mutual fund investors and in providing a sound legal environment for the development of the mutual fund industry.Our domestic fund market, originated in the early 1990s,experienced a few years of spontaneous, sporadic and low profile operations. One important reason for its being lack of compliance and under development was due to the slow moving process of the fund legislation. The promulgation of the enterim Regulations for the Securities Investment Fund Management in November 1997, and the beginning of the "New Fund" experiment following this promulgation, became the symbol that our domestic mutual fund market entered a new phase of strengthening mutual fund regulations and cultivating market compliance. In a sense, the fund legislation and supervision are in fact the making of game rules for the mutual fund market as well as the supervision of and control over the players. Therefore my research on the mutual fund legislation and supervision will lay particular emphases on the interest bias in the rules of the game, as well as how to realize this bias through actual legislation and supervision in our real market situation.It is the belief of this thesis that fund holders are at a disadvantage in the design of the mutual fund system due to the agency problem and lack of fair bargaining mechanism, which will eventually hinders the efficiency of the fund system. As a result, the key issue of the legislation and supervision is to protect the interest of the fund holders. At the initial stage of our mutual fund market development, the market system is far from being complete. There is a need for the fund legislation and supervision to strengthen the law enforcement on the one hand, and to accelerate the improvement of the market system in order to reach the goal of a healthy and orderly market development on the other.Centered on this argument, this thesis shall conduct the discussion in 6 aspects as follows.Chapter 1 is the introductory part that deals with the history, motive and development of our domestic mutual fund experiment so as to give a brief account of the basic background and to explain the significance of this research work.Chapter 2 conducts analysis on the role of the fund legislation and supervision. The thesis holds that mutual fund in essence embodies a relationship between principal and agent. In this scenario where agency issue becomes unavoidable, the interest of the principal -fund hloder-maybe infringed by his/her agent-the fund manager. At the same time, the efficiency requirement of the fund system itself makes it difficult for the fund hloders to maintain their own right through the establishment of the fair bargaining mechanism while concluding ordinary contract. Consequently establishing an appropriate control system over the fund mangers in order to protect the interest of the fond holders serves as the basis for the development of the mutual fund system.The external system control over the fund mangers is expressed as the reputation system of market control and the compulsory legal system of the state. Reputation system and legal system are complementary to one another where the formation of the reputation system must rely on the sound legal system as its base for protection. Therefore the fund legal and supervisory system through the establishment of state legislation and supervision to protect the fund holders as its core function is the resu...