The Ownership Of Verification Power In Registration Of Securities Issuance

During the reform of securities issuance from the authorized system to the registration system, there is a controversy of the ownership of the verification power between CSRC(China Securities Regulatory Commission) and Stock Exchange. In the author’s opinion, the verification power should own to Stock Exchange and, Stock Exchange should in the leading position while the CSRC as supervisor. This system has a notable advantage in reforming the supervision system of security, fulfilling the demand of the expansion of the market, resolving the problem of the risk of zero-sum game and keeping the safety of securities issuance. And there are six points below to explain this opinion in details.The system can reform the supervision system of security. There are two purpose of reform, following the principle of supervise cooperation, first keeping The administrative regulatory agencies, such as CSRC, as after-event supervisor; second giving the verification power to Stock Exchange and make it as pre-event supervisor. The pre-event supervision of CSRC will obey the principle of reform and the promise of itself. And the leading position of Stock Exchange can contribute to the establishment of efficacious security market.The system can fulfill the demand of the expansion of the market. As the development of economic, there is a creasing requirement of investing and financing in security market, as well as escalating variety and scale of security. The tendency of expansion requires more professional and efficient which only can be reached when giving the verification power to Stock Exchange.The system is a good answer to the problem of the risk of zero-sum game. The problem, more specifically, the conflict of interest void the effect of game system, has roots in the non-independence of administrative regulatory agencies, such as CSRC, and the adverse impact of the involving political interest in the securities issuance. The independence of Stock Exchange can resolve the problem mentioned above.The system will safeguard the personal right of security issue of securities issuance. In the legal practice, the right of security issue is either franchise right or business right. This paper affirms the characteristic of the personal right of security issue. There will be tort of public power on personal right and there should be the way of relief. It is hard to realize the justice in the administrative regulatory agencies management system when it-reconsider-itself. However the tort case can follow the statute law and case law in the Stock Exchange-leading system to keep justice and compensate for loss.The Competency of CSRC in the Stock Exchange-leading system. The way of its supervision should not be ‘having the power of registration’ nor ’Veto Power’, otherwise it will be the CSRC-leading system in fact. The reconsider after verification objection system may not be suitable, cause it will be impact the verification power of the Stock Exchange and will conflict with nature of registration. The CSRC should do macroscopic supervision including both verification rule and verification action of the Stock Exchange. First build the complaint-receive system to survey the securities fraud and build the system of entrusted verification, suspend register and renew after guarantee. Second, using delist system to prevent the fraud issue and protect the benefit of investor, supporting the damage on fraud issue case. Otherwise reinforcing CSRC also can take advantage of administrative penalty and criminal liability.The suggestion for the revision of Securities Law. Securities Law should ensure the leading position of the Stock Exchange in registration of securities issuance, modification of current law provision: ‘Expect for the other rules of this law, no person nor can organization can do security issue without applying registration for the Stock Exchange and getting permission.’ Securities Law should ensure the duty of the Stock Exchange and the avoidance system of interested verification or, modification of current law provision: ‘The Stock Exchange should follow the regulation of the law to verification, open procedures and be supervised. The verification or within the procedure should not be directly or indirectly interested with issue proposer and related organization. The staff should not hold the security in verification nor contact the issue proposer and related organization privately. ’Securities Law should ensure the period of verification and valid condition, modification of current law provision: ‘The security which should be registered, will be valid after twenty days from the day of registration document accepted, unless the objection of the Stock Exchange. The day of registration document accepted will be renewed when proposer present the explain document, amended document asked by the Stock Exchange.’...