Legal Study On Pledged Bond Repurchase

Bond repurchase was established in1991and has shaped an importantshort-term debt-credit platform for various kinds of participants in market for thepast20years, thus making a positive contribution to the promotion of the innovativefinancial market in China. Then it appears all kinds of violation of law andregulations in national debt repurchase transactions, the situation that securitiescompanies misappropriated investors’ securities is particularly serious. To solvethese problems, bond repurchase system has been reformed since2006, to preventthe illegal operations of bond repurchase transactions in mechanism. In our country,the paper securities which have only short-term history were soon replaced bypaperless securities. Since the end of1993, China has begun to issue paperlesssecurities and all listed securities have been fully paperless. In the paperlessbackground, it is difficult to explain the system of bond repurchase if we continue toadopt the way of thinking of paper-based era. In the paperless era, it is necessary to study the essential attribute of bond repurchase and the legal relationships among theparties of pledged bond repurchase.In this thesis, it will analyze the legal relationships among the participants ofbond repurchase, and give the analysis of the problems in practice, then put forwardsuggestions for bond repurchase perfection. This thesis is divided into four parts:The first part presents a description of bond repurchase. Firstly, it gives a briefintroduction of concept, classification and course of development of bondrepurchase. Secondly, it elaborates a brief analysis of bond repurchase reform in2006, mainly expounding the related system of repo and trading principles. Finally,it sorts out the pledged bond repurchase transaction process. This part just presentsthe basic content, laying the foundation for the following parts.The second part is about the analysis of the legal relationship among theparticipants in pledged bond repurchase transactions. This part starts with theproblem that non-paper brings to bond repurchase and analyzes the legalrelationship among three participants, named the investors, securities company and securities Depository and Clearing Corporation. Among the relationships, the legalrelationship between investors and securities companies is indirect representation,the legal relationship between securities companies with the securities Depositoryand Clearing Corporation is representation and settlement and the legal relationshipbetween the investors and the securities Depository and Clearing Company isregistration, depository and pledge.The third part analyzes the judgment of pledged relationship and processingrules. And for this purpose, it takes an example of the property damages case of adispute between Changchun fund management center and the China SecuritiesDepository and Clearing Corporation Limited Shanghai Branch. The problems ofpledged bond repurchase differ from before and after since the new rules have beenset up in the reformation in2006. This part makes a comparative analysis for thefollowing questions: whether the pledge relationship established or not, whether theSecurities Depository and Clearing Company have the ability to exercise the rightquality as a bona fide third party, and how to bear responsibilities if securities companies misappropriated investors’ securities in bond repurchase.The fourth part is about several suggestions to improve the pledged bondrepurchase system in China. Under the old trading rules of bond repurchase system,a large number of misappropriating phenomena appeared. In the condition ofdematerialization, the new bond repurchase system needs to build a more rationalsystem to circumvent the system risks. This part mainly elaborates the bondrepurchase Trust Registration System and pledge registration system, and analyzesthe functions of the Securities Depository and Clearing Company, then it putsforward the suggestions on the compensation responsibility for damages, in order tobetter safeguard the normal operation of the bond repurchase transactions.