Research On The System Of Securities Investors Suitability

The system of securities investors suitability is a system that protects the interests of investors. Investors suitability means that when in the professional activity of selling securities products, providing consultations and managing asserts for the investors. Securities companies should know the information of investors, such as the asset condition, preference of risk, the purpose of investment, investors' experience to recommend suitable products for the investors.“Investors Suitability” is set out in our countries' current legislation, concretely embodied in the stock index futures; securities margin trading, second-board market. However, there still have several problems in practice. This paper researches on the connotations, the demand of practice, the basis of theory and the legal position of investors suitability. The paper expounds the category of investors and products, suitable recommendation and legal liability system. This paper is divided in five chapters:The first chapter outlines the system of investor's suitability. This chapter is discussed in three parts: firstly, it discusses connotations of investors suitability; secondly, it discusses the practice demand of investors suitability, including economics theory of asymmetric information and legal theory of investor protection; lastly, it analyses theoretical foundation of securities investors suitability, including the theory of agent, the theory of special circumstance and the shingle theory.The second chapter analyses the legal characteristic of the system of securities investors suitability. In this part, this paper introduces the legal position of this system in other countries and illustrates the legal position of this system in our countries' regulations, including regulations about growth enterprise market, stock index futures and securities margin trading, pointing out the rule of determining that are authorized investors in the three specific areas.The third chapter explains securities companies should konw the key elements of the system of investors suitability when the perform the duty of suitability. Then securities companies shall make a categorization on the basis of knowing investors and securities products to define the scope of suitable investors.The fourth chapter introduces how securities companies make a recommendation of suitability in business. This part points out the legislation problem that securities companies only pay attention to risk tolerance of investors and the suitability of products, then present suggestions to improve the level of recommendation. This part involves that the securities company how to sale, provide advice, manage asserts of clients and released duty in securities markets.The fifth chapter introduces the legal consequents of securities companies when disobeying the system of investors suitability. This part analyzes the elements and the low cost of securities companies in breaking the rule of investor's suitability. Therefore, penalty compensation shall be introduced. Thus the cost of violation of investor's suitability system will be increased.