The Research Of The Restraint On Administrative Discretion For Administrative Penalty For Sponsors’ Misrepresentation

More securities defrauds would happen if sponsors were not punishedsufficiently. Administrative penalties decisively affect sponsors’ civil andcriminal liabilities. In securities law, CSRC’s administrative discretion is notsubject to legislative restraints. Moreover, due to paradox of CSRC’ssupervision both in verifying and punishing sponsors, it leads to theinsufficient accountability for sponsors administratively and judicially. Whenissuing the administrative penalty for sponsors’ misrepresentation, CSRConly investigates and affixes sponsors’ legal liability in breach of duty of duecare instead of duty of loyalty.In Chinese securities law, the types of misrepresentation are merelydivided by behaviors of forms but are lack of subjective essentials, thusleading to the fuzzification on the range of administrative discretion for punishing sponsors’ misrepresentation. For sponsors in securities defraudcases, there are three kinds of subjective states, including the negligence,indirect intent and direct intent; it raised the necessity for redefining the typesof misrepresentation. Hence, in order to restrain the range of administrativediscretions, the article suggests a new method to distinguish the differenttypes of misrepresentation. The subjective and objective essentials ofsponsors in fiduciary duty should serve as the benchmark when we telling thetypes of misrepresentation. With the new misrepresentation definition system,sponsors should undertake different legal liabilities for different types ofmisrepresentation. It would restrain the range of administrative discretionsand would strengthen sponsors’ legal liability. When a sponsor violates hisduty of loyalty by misrepresentation, he should be charged by criminalliability, civil liability (if stock repurchasing exists) and more restrictadministrative penalties. When a sponsor violates his duty of due care by hismisrepresentation, he should be charged by civil liability in compensating theloss of investors and by common administrative penalty.