Sponsor Behavior Risks And Legal Regulation

In order to improve the quality of information disclosure and credibility of the public listed companies, there are two approaches regulatory authorities can take. To regulate and monitor the companies directly and to regulate and monitor the sponsors to achieve the goal indirectly.Sponsor is the security dealers specialized in sponsor activities. Sponsoring activities have the characteristics following: (1) The requested qualifications of engaged in sponsoring activities is very high. (2) The supervision and management to sponsoring activities is stricter and wide spreader than common securities behavior. (3) The time of supervision and management to sponsoring activities is very long. (4) The risk which sponsoring activities undertakes is bigger. With characteristics above, sponsoring activities exist independently as one kind of special securities behavior that precisely have above these differences from other common securities behaviors, thus is its researching value and the necessity. Since sponsor system came into existence in China from 2003, there are many publications providing intro level explanation of sponsor system in the growth enterprises market. On the contrast, little research is done on the risks involved with sponsor activities. To ensure the quality of the listed companies, reduce market risks and to protect the interest of the investors, it is crucial to have a well regulated system in place to control the risks related to sponsor activities.There are three main duties for sponsor activities, Recommendation, Guidance and Governance. The sponsor's actions will have implications on the market and will bring along the risks. There two categories of risks in here. 1) The risk for the sponsors themselves, e.g. legal risk, morality risk, market risk, and human resources risk etc. 2) The risks brought by sponsor activities to the market, e.g. the stability of the market and risks due to the public listing of the sponsored enterprises.The Sponsors system exists in the growth enterprises market around the world. NASDAQ, AIM and HK GEM all have proper sponsors system in place and accompanied with regulation and risk control mechanism to provide a healthy...