Legal Regulation Of Illegal Fundraising In Underground Finance

Lower degree of financial innovation in China, relative to a single investmentand financing channels, which leads to the contradiction between supply and demandof social capital is expanding. On the one hand, private investment desires withtheincrease of household savings and growth, but less official investment channels,investors Lured and blind obedience to mental rash investment this illegalfund-raising soil. On the other hand, the private economy the demand for capital isincreasingly strong, but the narrow path of its financing, which leads to a privateenterprise set his sights on underground financial, these led to the large number ofillegal fund raising activities.Illegal fundraising activities carried out by underground finance in China firstappeared in the Yangtze River Delta region, and then gradually spread to all parts ofthe country. Although the public security department, the regulatory authorities offinance and the administrative department for industry and commerce have joinedforces to fight them many times, they still exist. Law-breakers usually promise themasses profits which are apparently higher than those given by financial organizations,catering for people’s needs of making profits by investments. When fundraisers cansuccessfully keep “robbing Peter to pay Paul”, the illegal fundraising activities willnot be exposed for a long time, which makes it difficult for the existing regulatorysystem of finance to control them effectively. At present, the underground financeparticipating illegal fundraising has become a prominent social and legal problem.The research methods of this paper mainly include normative analysis,interdisciplinary method and empirical analysis. The body of the paper is composed of four chapters.The first chapter analyzes the status and role of underground finance in China’sfinancial ecosystem and elaborates on the concept, background and influence ofunderground finance. The paper focuses on underground banks and usurers that arerepresentative of the underground financial organizations. As a financial variantnaturally born within the national financial restrictions, underground finance is theresult of a variety of factors and has both positive and negative impacts on the marketeconomy.The second chapter carries out normative analysis of the current legislation onillegal fundraising involving underground finance, covering the legal liability systemfrom Company Law, Banking Law, Securities Act to Criminal Law. China’s regulationof illegal fundraising involving underground finance also has an interface procedurefrom non-criminal law to criminal law. Related financial legislative activities shouldmake overall plans and take all factors into consideration. Laws should be enactedwith perfect timing, neither lagging far behind nor going far ahead of time.The third chapter discusses the judicial authorities’ difficulties in working onillegal fundraising involving underground finance cases. Problems arising from theapplication of substantive laws, procedural laws and criminal justice policies to suchcases are analyzed in detail. Difficult questions such as what activity constitutes acrime, what type of crime it constitutes, how much crimes it constitutes, whether acrime is committed by groups or by the natural person must be answered. To Pursuethe harmony of the legal effects and social effects, it is necessary to correctly graspthe relationship between criminal suits and civil suitsand pay attention to theprotection of victims’ rights and interests.The fourth chapter examines the effectiveness of the existing financial systemand looks into the future of China’s underground finance. We advocate changing theprohibition of private fundraising into the supervision of it. Loopholes in the law,regulations and supervision system should be plugged to remove the breeding groundfor a variety of financial anomie behavior.