On The Perfection Of China's Equity Trust System

As the main form in property rights trust,equity trust occupies an important position in modern wealth management.According to the theory of trust law,an equity trust shall be a legal act that trustor sets his own equity as trust property and beneficiary gets benefit through the management and disposal of trustee,which highlights the management function and the trustee gets paid by his trusted or professional management behaviour,with the purpose of"entrusted by someone,be loyal to someone".The trust system was introduced into China after Reform and Opening,and since the official launch of the trust business in 1979,Chinese trust market has been in a state of gradual standardization in its exploration,while lagging legislation,alienation of trust purposes and "plugging in"supervision mode are the main issues,and these situations are particularly prominent in equity trusts.The Trust Law of PRC does not define the intension and extension meaning of the equity trust explicitly,and it only provides the principle that trust can be set on legally-owned property and property rights,while The Administrative Measures Management on Trust Companies further clarified that trust companies can operate capital trusts,movable property trusts,negotiable securities trusts and other property rights trusts.And among the regulatory ruless there are only two documents focus on equity,namely The Operational Guidelines for Private Equity Investment Trust Business and The Operational Guidelines for Securities Investment Trust Business.However,the two documents above are the guidance to make trust companies invest their trust funds in companies' equities,and regulate their business behaviour of"management for someone".While in practice,even though the China Trustee Association clarifies that the equity holding trust has two forms,namely property trust(or equity management trust)and capital trust(or equity investment trust),the equity investment trust,especially the securities investment trust occupies the market according to statistical data,and the equity investment trust is"financial productization",seeking for fiancial benefits rather than entity investment returns.At the same time,the few equity management trusts and private investment trusts have already alienated as financial instruments virtually,this means that fund organizers,demanders and trust companies use the scarcity channel value of trust licenses to d esign trust products,collect trustors' funds into the project companies according to the financing needs,trustors obtain confstant returns,while trust companies get the"channel fees".The practices of the above equity trusts bring about three consequences:firstly,the equity trust becomes a tool for restricted industries,local governments and financial institutions to avoid supervision,and this magnifies the financial leverage,forms the potential risk points for systematic financial risks;secondly,the equity trust deviates from the purpose of management,pursues finance and becomes a tool for earning monopoly financial profits,then makes it hard to meet the growing demand for social wealth management essentially;thirdly,since the equity management trust that meets the purpose of trust is not the dominant form in market,legal impediments in its practice have been neglected,which deepen the difficulty of its development in return^and then create a negative cycle.The legal impediments includes two aspects;firstly,if the trustor wants to entru.st his equity in listed companies,the process of ownership changing in trust establishment can't be completed,which makes this kind of trust difficult to operate;secondly,if the trustor wants to entrust his equity in unlisted companies,there is a potential conflict between trustee's information disclosure obligation and the confidentiality of unlisted companies.To improve China's equity trust system,we should start with three aspects.Firstly,clarifying the connotation of equity trust,making trust return to its origin and vigorously developing equity management trusts,namely we should classify the trust types by trust properties,specify that only equity rather than funds can be the trust property in equity trusts,serve medium and small investors in listed companies and equity investors in high-risk and high-growth unlisted companies.Secondly,adjusting the supervision model,this means making the equity management trust as the dominant business form in trust companies and give policy supports,using the new asset management rules to strictly limit equity investment trusts and gradually shift them to various fund operations,choose to meet rather than avoid the IPO regulatory requirements.Thirdly,eliminating the legal impediments in equity management trust:coordinate the CSRC and CBIRC by the State Council Financial Stability and Development Committee to perfect the securities registration management measures,increase a registration terms of listed company's equity trust;create a trust supervisor system to balance the potential conflict between information disclosure obligation and confidentiality in order to improve the level of justice,fairness and openness.