Research On The Protection Of The Rights Of The Lender In The Stock Pledge Repo Transaction

Since 2015,China’s stock pledged repo transactions have developed rapidly,but the fluctuation of China’s securities market makes the stock price frequently touch the warning line and closing line in the stock pledged financing.Since the end of 2018,the A-share market has raised the alarm of stock pledge financing of listed companies;at the same time,there have been frequent cases of insufficient liquidity of pledged shareholders’ capital and failure to repurchase Pledged Shares as agreed.According to incomplete statistics,12 securities companies announced that in 2018,the provision for impairment of assets related to pledge repo transactions totaled 5.13 billion yuan.The recent outbreak of 2019 n-Co V pneumonia has also brought a great impact on the domestic stock market,the stock market price fluctuation,the operation of listed companies is blocked,and the capital flow of shareholders is blocked,or the risk of infringement of the rights of the lender of the shares of the stock repurchase in 2018 will be repeated.Therefore,the protection of the rights of the lender in the stock pledge repo transaction should be the focus of attention.The lender inevitably faces credit risk and market risk.In the stock pledged repo transaction,there are two kinds of situations in which the rights of the lender are infringed: one is that the borrower does not have enough funds to pay the interest and repay the principal on schedule;the other is that the value of the underlying securities is reduced,which makes the purpose of the lender’s pledge to guarantee the creditor’srights cannot be or can’t be fully realized.Therefore,for the protection of the rights of the lender in the stock pledge repo transaction,the lender can use the methods of self relief and public relief after the event,but the legislation should also pay attention to and support the way of prevention in advance.In this paper,the ways of prevention and remedy for breach of contract in this transaction are investigated and sorted out in practice.Although the ways of protecting the rights of the financier of stock pledge repo are becoming more and more clear in recent years,there are still practical dilemmas in the conflict of rights realization norms.Therefore,by studying the current situation of the protection of the rights of the lenders in this transaction and putting forward suggestions for improvement,we hope to play a little role in the steady development of the protection of the rights of the lenders and the stock pledged repo business.This paper consists of four parts.The first part discusses the basic theory of the protection of the rights of the lenders in the stock pledged repo transaction.It summarizes the legal relationship of the stock pledged repo transaction,clarifies the significance of the protection of the rights of the lenders,analyzes the infringement of the rights of the lenders and the two dimensions of the protection of the rights in the prevention and remedy of breach of contract.The second part discusses the practical dilemma of the prevention of breach of contract,which is mainly the conflict between the regulation of reducing the holdings,the current norms of transferring the pledged property by the pledgor and the demand for stock circulation of the merging party to obtain funds to pay the debts to be matured.The third part discusses the dilemma of the remedy for breach of contract in stock pledge repo,and the conflict and deficiency between self-help and public relief are discussed respectively.Through the analysis,the author thinks that there is no reasonable explanation in judicial practice or legal theory for the current situation of the realization of the pledge right of the restricted shares,so the realization of the pledge right of the restricted shares needs system improvement;further,the realization of the pledge right and the supervision of the reduction exist the conflict of freedom,fairness,efficiency and order value,and the reduction standard needs to be revised to balance it.In addition,there is a gap in thenorms of the reasonable time limit for the realization of the pledge.On the other hand,in the aspect of the public remedy of the lender,the judicial intervention inevitably leads to the high cost of the right remedy;amendment of the securities law makes judicial disposition or subject to restrictions on sale and reduction;and the reference price mechanism of the judicial auction,one of the current judicial disposition modes,fails to determine the reasonable price.Finally,according to the current dilemma of the rights protection of the lenders,the paper puts forward some suggestions for improvement : paying attention to and improve the prevention measures of the default of the lenders,including setting the transfer proportion and time requirements of reducing the holdings,allowing the pledgor to transfer the Pledged Shares independently under certain conditions;clearing and improving the norms of self relief of the lenders,that is,allow the specific subject to accept the restricted shares to exercise the pledge,and gradually promote the pledge’s self-help without the restriction of reducing the holdings;coordinating and improving the relief system for the public breach of contract of the lender,including the application of non litigation procedure to exclude the entity’s right of objection,the coordination of judicial disposal and the standard application of sales restriction and reduction,and the improvement of the reference price determination mechanism of judicial auction,etc.