Study On Legal Measures To Guard Against The Risk Of Investment In The Market Operation Of Guarantee Corporation

Due to the rapid economic development in our country, the capital demands in enterprises increaseconstantly. The state-owned large and medium-sized enterprises with the strong financial strength or thenational capital support could turn over the capital smoothly and expand their business constantly. For themedium-and small-enterprises, however, which lack of capital to invest in the new technology and newproduct development, are difficult to conform to the formal lending standards from the financial institutions.Financial problem in the medium-and small-enterprises has become a common phenomenon nowadays. Inorder to solve this problem and to reflect the market information symmetry and integrity and rights andobligations, investment guarantee industry arises at this historical moment. Investment guaranteecompanies, to some extent, absorbed more and more private capital to provide the funds to the short-termneeds for the small businesses; in the meanwhile, provide the guarantee for them to get the funds from theformal financial institutions, which promotes the capital circulation and improve the effectiveness of theresource allocation. Under the big background of market economy in China, the guarantee industry is notideal because there are some investment risk, operations risk, and even serious violations and illegalproblems in the industry. In terms of the reasons for this phenomenon, it’s mainly because that laws andregulations are imperfect, supervision is not in place, and risk management is not comprehensive, etc. Allthese factors cause the collapses and the bankruptcies of the investment guarantee companies and the director indirect financial loss to the investors. Therefore, this paper attempts to analyze the causes of thisproblem and figure out how to establish and improve the laws and regulations in the investment guaranteeindustry and its supervision.The first part of this paper is to briefly introduce the investment guarantee company, including theconcept of investment guarantee company, legal status and the necessity of its existence. A thing that onlyhas the necessity of its existence and the proper positioning is worthy for us to study it. So, in the first part,the legal status and the necessity of its existence will be analyzed. The second part of this paper is todiscuss the possible capital risks, operations risks, and serious violations and illegal problems in theoperations of the investment guarantee companies. which make medium-and small-sized enterprises or investors loss their investments and bring the adverse impact on the development of the whole industry.The third part is to analyze the reasons of these risks. It includes the laws and regulations, supervisionsystem, risks prevention etc. On the basis of the third part, the fourth part is to provide some suggestions onthe risk prevention for the investment guarantee companies, in the terms of the perfection of laws andregulations, the comprehensive supervision system, and the form of the mechanism to spread the risks.Through the analysis of this paper, we can make a conclusion: the investment guarantee company hasthe value of its existence; at the same time, we should be aware that guarantee industry is a high-riskindustry. We have to make efforts on controlling risks and minimizing risk, but we cannot eliminate risks.First of all, we should find a precise legal position for the investment guarantee company. On the basis ofthat, to establish and perfect the relevant laws and regulations and to improve the supervision mechanismcould provide the investment guarantee companies a healthy and comprehensive environment so that theycan sustainably develop themselves and continuously play an important role to solve the problems of thefinancial difficulties in the medium-and small-sized companies and promote the development of overalleconomic stability.