Research On Civil Liability Of The Custodian Of Securities Investment Fund In China

In the context of optimizing business environment and financial deepening reform,China’s financial becomes more market-oriented and liberal.Registration system reform of fund industry strengthens the market competition so that the fund custodian plays an important role to safe custody of fund assets,power balance of fund managers,supervision of fund investment operation and protection of investors.Clear civil liability of the fund custodian can promote the effective performance of its duties.From the current laws and regulations related to securities investment fund and the fund custodian,some questions about the civil liability of the fund custodian are still controversial.The internal governance mechanism of the fund industry is still limited.Asset Management Association of China and China Banking Association have different opinions on the liability assignment of the fund manager and the fund custodian.Therefore,this paper will systematically analyze the legal status,duties,civil liability nature and liability assignment types of securities investment fund custodians in China,so as to clarify the relationship between the fund manager and the fund custodian,improve the civil legal liability system of the fund custodian.This paper mainly depends on the Securities Investment Fund Law to launch the discussion,so the research object is contractual securities investment funds.Moral risk should be controlled in fund management companies.What’s more,convening fund unit holders’ general meetings has certain difficulty so that the meetings can not supervise the manager effectively.Therefore,the fund custodian plays an important role in supervision.Under the comparison with foreign countries,the structure of securities investment funds in China is similar to mutual trust mode of British.It overcomes the defects of the legal status of agent or depository.The rights and obligations of the three parties are arranged in a trust deed.The fund custodian is the trustee of investors.The legal status of trustee of the fund custodian not only reflects the meaning of deposit,but also emphasizes its supervisory duty.It highlights the role of checks and balances.Apart from the limited list in the law,we can expand the explanation of the duties reasonably within the scope of diligence and responsibility,which can promote the fund custodian perform its duties more effectively.Trust relationship is based on the trust contract,the obligations of the fund custodian can be detailed and changed flexibly.For example,some private funds are invested in non-standard assets.The fund custodian can not get net worth to review.However,there are some differences between trust and contract as well.Faith obligation is not fully pursuant to agreements.Its essence is still a legal obligation,which is an irreducible core responsibility to investors.If the parties ignore to reach an agreement on some duties within the scope of faith obligation of the fund custodian specifically or some relevant exemption clauses exist in the contracts,they both cannot be used as a basis for non-performance of its duties.Under the current development of China’s legal system,the nature of the fund custodian’s civil liability is more suitable for the concurrence of breach of contract and tort.The interest of fund investors can be protected by both agreements and statutory duties.In terms of specific civil liability assignment,when the fund manager and the fund custodian cause damages based on their respective functions,they should bear separate liability independently.If the loss is caused by the combination of the their acts,different relationships of liability can be applied on the basis of subjective fault.Their joint acts lead to joint and several liability and the fund custodian has subjective fault of intention,which includes two main situations.They have intention liaison in advance,and take actions with mutual intent.In addition,knowing that the fund manager has failed to fulfill its responsibilities,the fund custodian ignores it and allow further loss,or even give a hand.However,when the the supervision negligence occurs,the fund custodian shall assume the corresponding supplementary liability for compensation.In order to implement the illegality evaluation of omission tort and the adequacy of legal causation,its supervision obligation can be included in the category of transaction security duties.The degree of negligence fault is lower,and omission is an indirect reason.Joint and several liability,shared liability or unreal joint and several liability are not suitable in this case.There is a dilemma in the explanation of fault and causative potency.The supplementary liability comprehensively considers the differences of duties between the fund manager and the custodian,the subjective state of fund custodians,causative potency and other relevant factors.They are in different orders of compensation,which implements the principle of fairness,the principle of consistency between fault and liability,and conforms to the value of law.Fund custodians are banks and other financial institutions with strong economic strength.The supplementary liability can guarantee investors to obtain corresponding compensation to some extent.Actually,the supplementary liability is recognized and applied in many cases.