Research On Advance Compensation System In Securities Market

The protection of investors is one of the objectives of the securities legal system and the improvement of the protection of investors is necessary for the improvement of the level of the securities market of China.In China’s securities market,illegal acts such as fraudulent issuance and false statement are frequent,causing huge losses to securities investors,but it is difficult for investors to protect their rights.In recent years,the successful experience of three cases of Wanfushengke,Unicom and Xintai Electric has proved that advance compensation has played a significant role in resolving securities market disputes in a timely manner,effectively enhancing investors’ sense of gain,and saving judicial resources,and is a diversified dispute resolution mechanism that can stand the test of the market.In 2020,the Securities Law establishes the system of advance compensation under Article 93 of the special chapter "Investor Protection" for the first time,providing a legal basis for the application of advance compensation in the future.Based on the theoretical basis of the advance compensation system,the paper probes into the advance compensation system in some typical cases in the past,and puts forward some suggestions on how to improve the current advance compensation system by referring to the American fair fund system and investor protection fund system.The main content of this paper includes:introduction、body、conclusion.The introduction points out that according to the existing practice,the advance compensation system has played a significant role in resolving securities market disputes in a timely manner,effectively enhancing investors’ sense of gain,saving judicial resources and other aspects,and is a diversified dispute resolution mechanism that can stand the test of the market.The introduction also sorts out the predecessors’research on the advance compensation system to lay a solid foundation for this paper.The main research methods of this paper are normative analysis and comparative study,followed by empirical analysis.The introduction part summarizes the structure,main innovation and shortcomings.Under the background of the formal establishment of the advance compensation system in the "Securities Law",the research on the advance compensation system is no longer a castle in the air,but more practical significance.The body is divided into four chapters.The first chapter combs the logic foundation of advance compensation system.Advance compensation system is a kind of civil liability substitute compensation in essence,and its core value is to transfer the complicated litigation risk to the securities companies and other liability subjects.From the perspective of private law,it refers to the conversion of the tort debt of the indemnifier first into contractual debt,the core of which lies in the conversion or substitution between the compensation in civil actions for performance of the tort debt and the advance compensation for performance of the contractual debt.At present,Chinese securities market practice has a demand for an advanced compensation system.The advanced compensation system can help quickly realize the stability of the securities market and protect the rights and interests of securities investors in a timely manner.In addition,it can also improve the operating capabilities and reputation of the securities industry.From an investor’s point of view,the function of advanced compensation is mainly to achieve civil compensation in a prioritized,timely and full manner.However,the advanced compensation system is also facing real worries,which may cause cost transfer and moral hazard issues.Chapter Two reviews Article 93 of the Securities Law.The amendment to the Securities Law formally confirmed the advanced compensation system at the legal level,laying a solid foundation for the application and implementation of the system,which deserves high recognition,but it also has many shortcomings.Starting from the existing rules,this chapter makes a comprehensive review about applicable scope、the legal nature、the recovery mechanism and the division of responsibilities、the role of the investor protection agency and the incentive mechanism,and points out the advantages and insufficient.This chapter also reviews and analyzes the practice of the advanced compensation system in China,including three advanced compensation cases from Wanfu Biotech,Hailianxun,and Xintai Electric.The third chapter combs the American fair fund system and investor protection fund system.The American fair fund system has become an important part of making up for the lack of private civil litigation methods,and it plays an important function that cannot be replaced.This part also sorts out the establishment process of the fair fund,the formulation of the fair fund distribution plan and the operation of the fund.The important role of investor protection funds in maintaining investor confidence,ensuring the stable development of the securities market,and protecting the rights and interests of small and medium investors has been recognized by various countries and has been widely established worldwide.This part sorts out the fundraising,compensation and supervision of investor protection funds.At the end of this part,on the basis of referring to the American fair fund system and the Chinese investor protection fund system,combined with the existing practice cases of advanced compensation,it sorts out the reference of related systems.The fourth chapter elaborates the approach of China’s advanced compensation system.In general,this section proposes the following suggestions:clarify the types of cases applicable to advanced compensation,expand the scope of advanced compensation subjects,and restrict the scope of advanced compensation objects;clarify the role of investor protection agencies in the advanced compensation system;The formulation of the plan is subject to institutional constraints;endows the enforcement of the advanced compensation agreement;builds a complete advanced compensation system accountability system,divides the scope of responsibility of each responsible entity,clarifies that the excess compensation to investors does not belong to the scope of recovery,and clarifies the advance payer The principle of priority of civil liability should be applied when recovering from other jointly liable persons;explore the incentive mechanism of the advanced compensation system,combine the advanced compensation system with the administrative reconciliation system,and in practice allow the advance payer to be exempted from punishment by applying the administrative reconciliation clause.The concluding part is a simple summary and summary of the full research,combing the research results of this article on the subject of advance compensation system.