The Expansion Of Financial Professionals’ Fiduciary Duty In The Capital Market

The current financial system transfers from traditional financial frameworkwhich the banking system as the core to modern financial framework which is basedon the capital market. China, as an emerging market, with the deepening of capitalmarket reform and innovation, security has always been the pursuit of financialmarket supervision. The reformed goal of the capital market is to improve investorprotection mechanism. The level of financial consumer protection has become ameasure of China’s capital market. Securitization of financial instruments anddisintermediation of capital make a wide gap between investors and managers. Assetmanagers are always been a dominant position both in the information andmanagement, and the financial professionals conduct insider trading, marketmanipulation and other illegal acts, which increasingly draw people’s concern. In thisregard, there is an urgent need for the "fiduciary principle" which applies to therelationship between financial institutions and investors in our emerging andtransitional country.The expansion of the "fiduciary duty" which evolves from themoral obligation into the compulsory regulation will strengthen the financialprofessionals’ responsibility. Only in this way can we seek the legal system of capitalmarket and protect the interest of financial consumers in China.There are four chapters in the following: Chapter I starts from the general theory of fiduciary duty, and presents the basicconcept and main content. Then, it explores the generalization phenomenon offiduciary duty in the modern economy which has already covered trust, brokerage,agency, partnership and other legal nexus that serve as an implied term. Then, itmakes a reflection of the fiduciary duty with law and economics perspective, andbegins with the theory of separation of corporate’s ownership and control founded byBerle and Means. And then, it traces back to the birth of the concept, fundamentalstructure and development of the fiduciary duty. Next, it illustrates that the fiduciaryduty is the optimal institutional arrangement to tackle with principal-agentrelationship and tries to explain that the fiduciary duty will optimize the capitalmarket under the context of economic market.Chapter II draws a conclusion that the financial consumer protection is closelyrelated with the development of capital market in the view of operation and regulatorymechanism of the capital market. With the above guidance, it analyses the necessityand feasibility of the expansion of fiduciary duty. Further, it discusses the currentsituation of theoretical research on the fiduciary duty in China, and points out thedeficiency in the essence and extension of the fiduciary duty. After that, it emphasizescoupling effect in the application of the fiduciary principle. Finally, it take theso-called fat finger trading error in the Everbright Securities Co., Ltd. as an exampleto examine the judicial practice of fiduciary duty in China.Chapter III analyses two typical financial cases which applied the fiduciaryprinciple in the US judicial practice, in order to tap into the applicable basis offiduciary duty via elaborating the evolution of fiduciary duty in capital market.Chapter IV researches on the status quo of the fiduciary duty from theperspective of civil law and financial law combined with the legislation of the currentcapital market in our country in the form of charts. With a growing trend of financialintegration and the booming of wealth management, it suggests that the urgent need oftransplantation and expansion of the fiduciary duty under the established legalframework, and it puts forward several constructive proposals from the fundamental concept, substantive law and procedural law aspects respectively, making an effort toachieve the successful legal practice of fiduciary duty in our country.