Research On Jurisdiction Of American Depository Receipts Information Disclosure System And It's Enlightenment

With the development of Internet and digital communication technology,the internationalization trend of financial market in each country is moving on.Based on this background,many financial experts innovated new products instantly,depository receipt(DR)is one of them.Recently,ADR projects are also expanding,which becomes the main way for foreign companies(especially Chinese companies)to list in U.S.A.Every coin has two sides.There are advantages and disadvantages in issuing ADR in United States.First of all,issuing ADR can help corporation raise money quickly.In addition,the issuing and listing rules of Securities and Exchange Commission and the American stock exchange that companies shall obey during the issuance and listing process can help them strengthen administration system and raise management level.If enterprises success in issuing ADR and listing in U.S.A.,it will help the company improve popularity and expand overseas market.However,these company issuing ADR and listing in U.S.A.market will be confronted with many legal risks,of which the most noticeable risk is the consequence of violating information disclosure obligation.As a country that have the severest rules regarding capital market all over the world,America has severest securities regulation ruleswhich information disclosure is the soul of them.These company who issue ADR and list in U.S.A.violate information disclosure requirements for America depositary receipts,the authority will impose severe penalty or file delist announcement on these companies.The foreign company issuing underlying securities will be filed securities group litigation,if it's violation of information disclosure obligation impacts ADR holders' profits.Because of the inherent transnational nature of depositary receipts,American legislation authority,executive authority and judicial authority will inevitably cause conflicts with other countries' authority power.Therefore,it is important to research the issue of jurisdiction of American depository receipts information disclosure system.This dissertation studies such issue in four aspects,the general structure is as follows:The first chapter starts from basic legal issues on American depository receipts information disclosure system,which includes information disclosure requirements and rules in violation of disclosure requirements.This chapter puts emphasis on the classification of ADR and their information disclosure requirements.Based on the difference of relationship between foreign issuers and American depositary institutions,ADR can be divided into unsponsored ADR and sponsored ADR,which sponsored ADR can be subdivided into Level I-III ADR and R144 AADR.The Second part aims to study rules in violation of disclosure requirements in American domestic law,“Securities Act of 1933” and “Securities exchange act of1934” stipulate that conduct type,legal consequence and judicial jurisdiction regarding violation of information disclosure obligation.But “Section 30(b)” of“Securities exchange act of 1934” stipulates that“The provisions of this title or of any rule or regulation thereunder shall not apply to any person insofar as he transacts a business in securities without the jurisdiction of the United States”,from which American securities law shall apply to security exchanged within the jurisdiction of the United States.Thus,federal Courts attempt to illustrate the Congress' s intent on extraterritorial application of securities law based on presumption against extraterritoriality and Restatement of American Foreign Relations Law.The third part puts emphasis on extraterritorial jurisdiction of American depository receipts information disclosure system.Firstly,this part demonstrates the legality of extraterritorial jurisdiction of ADR information disclosure system,International Law allows extraterritorial jurisdiction of domestic law in some extent.Territory jurisdiction principle is the principal principle of traditional International jurisdiction principle,other jurisdiction principle can be deemed as extraterritorial jurisdiction in some extent.In recent years,countries have always tried to find new exceptions to territorial jurisdiction beyond personal jurisdiction,protective jurisdiction and general jurisdiction in order to expand the scope of extraterritorial jurisdiction.Then this part study extraterritorial jurisdiction of ADR information disclosure system from the perspective of American judicial precedent.Among these cases,Morrison v.National Australia Bank is the important turning point.Before Morrison case,American federal district courts and circuit courts used “effect test”,“conduct test” and “effect-conduct test” to illustrate the Congress' s intent on extraterritorial application of securities law,which resulted in the expansion of extraterritorial effect of ADR information disclosure system.However,American Supreme Court distinguished subject-matter jurisdiction and extraterritorial application and created “transaction test” in Morrison case.“Transaction test” requires antifraud rule of securities law only punish deceptive conduct “in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered”,unless Congress expresses opposite intent.American courts and professionals have different opinions regarding extraterritorial jurisdiction of ADR information disclosure system pursuant to “transaction test”.Except for district court for the southern district of New York,most courts hold that security rules apply to ADR listed and traded in American exchange,but they did not express explicit opinions regarding ADR traded in OTC.Some professions hold that ADR information disclosure system can not apply to unsponsored ADR transacted OTC,because underlying securities issuer have little,if any,involvement in setting the terms and amounts of those transactions.The Forth part contrast Chinese depository receipts information disclosuresystem and American depository receipts information disclosure system.Underlying issuer and foreign operating and intermediary institution should be subjected to Chinese security law.Besides that,if trade of securities outside the territory of the People's Republic of China disrupt domestic market of the People's Republic of China and infringe upon the lawful rights and interests of domestic investors,such parties shall be subjected to Chinese security law.Thus,the scope of CDR information disclosure system is wider than ADR information disclosure system.Based this ground,Chinese legislation authority shall stipulate penalty clause towards foreign conductor who do not cooperate with investigation and collection of evidence.In order to strengthen cooperation on supervision and law enforcement,Chinese authority can sign memorandum with other countries and regions actively and establish a professional cross-border cooperation team mainly engaged in securities regulation.