Study Upon The Civil Liability Of Financial Institutions On Violating The Suitability Obligation

In recent years, with the rapid development of China’s financial markets, people’s interest in investment is also growing. More and more residents are engaged in investing. However, the development of things is always accompanied by conflicts and contradictions. Due to the imperfect rules, ineffective supervision as well as conflicts of interest, disputes between investors and financial institutions are also increasing. If such disputes are handled improperly, they will not only easily lead to mass incidents, leading to social instability, but also inhibit the healthy development of financial markets and hinder the promotion of our economic level. The most significant conflict among them was financial institutions recommend financial products or services to investors inappropriately thus violating the Obligation of Investor Suitability.For a long time, the leading philosophy of commodity trading is "caveat emptor", that is the buyer has the responsibility to notice and pay carefully attention to the or potential flaws already existed or may exist in the future in commodity goods, and makes independent judge and investment decisions, and bear all the risks it poses. However, in the contemporary financial market, this principle can not be applied directly. With the development of financial innovation and the rise of financial transactions, complex financial products emerge in large numbers. The information of those financial products are quite difficult for the average investors to know, even if these information was fully disclosed, ordinary investors are difficult to make a reasonable judgment on the risks of those financial products since the information contained a lot of incomprehensible financial expertise. In this case, compared to investors, the amount of information available to financial institution is larger than investors’, thus ordinary financial investors making decision can only rely on recommendations of financial institutions. Therefore, investors’ trusts in financial institutions gave birth to "Sellers have responsibility" concept, which emphasizes that financial institutions shall bear the Investors Suitability Obligations based on its dominant position to investors. That is, financial institutions have the responsibility to recommend appropriate financial products to an appropriate investors in an appropriate manner, if financial institutions breach of this obligation, and thus lead to a loss of investors, they should bear corresponding civil liability to investors.However, in China, if financial institutions violate the obligations of Investors Suitability, they may only be punished by administrative decisions rather than judicial judgment since the laws and regulations keep silent on this issue, making it difficult for investors to obtain indemnity directly pursuant to laws and regulations. Meanwhile, in China’s judicial practice related to Investors Suitability Obligations, due to various reasons, the investor obtain little support from Courts, the available approaches for investors to protect their rights are quite few.We certainly look forward that Investors Suitability System can have a new breakthrough in the legislation, but in this era which financial products have a rapid development, let the financial institution bear the civil liability of breaching the Investors Suitability Obligation is an urgent requirement. Therefore, to find justice reference in the existing legal framework and thus giving sufficient remedy to investors for protecting their own rights is the best shortcut to solve this problem.Text of this paper is divided into five chapters:The first chapter describes the development process, the basic content, the theoretical basis and scope of application of the Investors Suitability Rule.The second chapter studies the necessity of financial institutions being liable for violating the Investors Suitability Obligations and the nature of that civil liability.The third chapter studies the judicial pradctice related to Investors Suitability Obligations at home and abroad and makes comments on that judicial practice.The last part of the chapter gives some suggestions on perfecting the system of pursuing financial institutions liabilities for violating the Investors Suitability Obligations.Finally, I will give a conclusion of this paper.