On Financial Attribute Of Securities Investors

Globally rapid development of the financial industry has been witnessing increasing diversity and prosperity in financial product/service innovation. Meanwhile, legitimate rights of financial product/service consumers have been exposed to more frequent risks and violation by financial institutions. Therefore, some scholars have been suggesting a universally applicable legal framework, to protect legitimate rights of consumers in the financial industry. It’s in this context that some have suggested that investors in securities shall be taken as part of consumers in the financial industry, to be protected by such laws. This cannot be as proper as it may seem at first sight, for investors in securities come from a variety of backgrounds; to recognize them, without differentiation, as consumers in the financial industry, will encounter a lot of problems in practice. If the securities investors and financial product/service consumers really hope to get their legitimate rights protected, and if their confidence in the financial markets is to be resumed, so as to promote long term development of the financial markets and the financial industry, it’s imperative to analyze securities investors and financial product/service consumers in a detailed manner in line with their respective identities or other aspects, before it’s possible to provide them with proper protection via effective measures. And such analysis requires clear-cut comparison and contrasts between securities investors and financial products/service consumers, to determine their differences, besides all the similarity. This thesis recognizes that securities investors can be recognized as financial practice service consumers, only when put under certain conditions. And it sets out to achieve the following.In chapter one, the thesis ushers in the topic by introducing background information on theories for the protection of consumer rights in the financial industries, and by recognizing relevant issues as pertinent to the protection of investors in securities. In this context, the thesis further illustrates theories where investors in securities are suggested to be taken as part of the consumers of financial products and services, with additional analysis on the theories provided.Chapter two discusses some problems from the perspective of theories for financial product/service consumer protection. First of all, fundamental characteristics of the financial product/service consumers, i.e. their disadvantages and vulnerability, as well as expected outcomes of financial demand and financial exchanges are discussed, accompanied by comparison and contrast with respective aspects of securities investors. Then, on the basis of differences in the risks exposed to by securities investors and financial product/service consumers during financial exchanges, theories concerning the protection of financial service/protect consumers and those for the protection of securities investors are contrasted and compared. It’s demonstrated that views for the protection of financial product/service consumers are based on theories focusing on information asymmetry and on inequalities between the parties in concern, while theories for the protection of securities investors are based on theories such as agency theory, theories concerning information publication, and views arising from disputes between the contract theories and jurisprudence theories. After these, it’s argued that problems may be encountered if securities investor are taken unconditionally as part of the financial practice with consumers. In China, the financial industry has been subject to patterns where operations and regulations are on a sector-specific basis. Besides, in the securities sector, the concept of investors has always been in use. Such makes it not practical to integrate securities investors into the financial product/service consumers, for it may lead to problems concerning the applicability of laws, waste in resources, etc. To avoid such problems, the thesis further discusses designing of systems in our nation for protection of securities investors, as well as relevant concerns over the integration of the securities investors into the financial product/service consumers.Chapter three provides discussions from the perspective of laws. First, protection of financial product/service consumers and protection of securities investors involve different legal relationships. Financial product/service consumers and the financial institutions are in relationships of financial consumption, while the securities investors and listed companies, securities companies as well as securities investment service institutions are in dramatically different relationships. Analysis leads to the conviction that securities investors can only be recognized as financial product/service consumers when they do purchasing from securities companies, securities investment service institutions etc. Secondly, financial product/service consumers and securities investors are subject to different rules in terms of legal protection. The thesis analyzes the applicability for securities investors from four aspects, namely, relevant obligations and responsibilities, cooling-off period rules, punitive compensation rules and imputation principles, as well as ways to carry out the obligations/responsibility. Thirdly, ways to protect the financial product/service consumers and securities investors are different. Protection of financial product/service consumers are often achieved by empowerment, while protection for securities investors are by regulation.Chapter four refers to laws and regulations beyond the China mainland to further discuss the problem. This chapter studies laws in the United States and the UK and Taiwan of China, to figure out how legislations in different countries and different regions identify financial product/service consumers so as to further discuss differences between securities investors and financial product/service consumers, and to help better identify the two concepts.Chapter Five concludes with the standards to distinguish securities investors from financial product/service consumers. Against analysis on existing standards in concern, the thesis concludes that individuals who purchase securities investment services out of professional purposes, purposes to conduct trade and exchange, or certain specified purposes, shall be regarded as financial product/service consumers and shall be subject to rules concerning protection of financial product/service consumers.