A Study On Investor Protection Of Depositary Receipts

With the rapid development of China's new economy and the continuous improvement of the capital market,China's depository receipts have emerged.China has successively issued legal documents on regulating the issuance of depository receipts,which provides a legal basis for the smooth entry of depository receipts into the capital market.For a long time after Xiaomi group applied for the issuance of depository receipts and immediately announced the suspension of issuance,there was no movement in the listing and issuance of depository receipts until Shanghai stock exchange accepted the application of No.9 Co.,Ltd.for the issuance of depository receipts on April 17,2019.No.9 limited company was registered on September 22,2020 and successfully listed.Xiaomi group's suspension of domestic issuance of DRS and the long-term listing of No.9 Ltd.reflect the complexity of the issuance system of DRS and the great challenges faced by investor protection.In this regard,we just need to have a more in-depth thinking,and build a protection mechanism for the investors of depository receipts that is suitable for the development status and future trend of China's capital market.This paper is based on the preliminary formation of the legal rules system of depository receipts in China,analyzes the basic legal relationship of depository receipts,points out the shortcomings of investor protection of depository receipts in China,and puts forward some effective suggestions to improve the practical path of investor protection of depository receipts in China.The basic legal relationship of depository receipts in China is not clear enough,and there are some deficiencies in information disclosure,agreement control and investor relief.To solve these problems,the most effective way is to reasonably learn from the successful experience of American Depository Receipts,affirm that the basic legal relationship of depository receipts is trust legal relationship in the dispute between principal-agent legal relationship and trust legal relationship,and use the dual ownership theory in the trust law of common law system to ensure that the property of the investor of depository receipts is separated from the property of the depositor,It also requires the depositors to fulfill their fiduciary duties and safeguard the rights and interests of investors.In addition,in view of the fact that the information disclosure rules unconditionally exempt the depositors and custodians from the obligation of information disclosure,it is suggested that the issuers and the depositors jointly undertake the obligation of information disclosure,and strengthen the synchronization of information disclosure between overseas underlying securities and domestic depository receipts,so as to avoid the loss of investment opportunities and the loss of interests of investors.In view of the possible infringement on the exercise of investors' rights caused by the adoption of agreement control and special ownership structure by the issuer,we should first clarify the effectiveness of agreement control from the reality.Considering that the control of the company by the management of the issuer may infringe on the interests of investors,we should appropriately restrict the exercise of the voting rights of the management of the issuer,so as to safeguard the interests of investors.In view of the problems existing in the investor relief,it is suggested to draw lessons from the behavior test and effect test theory of the United States to clarify the boundaries of the jurisdiction of the depository receipts in China,and to strengthen the civil relief,so that the issuers,depositors and other subjects who violate the law and cause damage to the investors should bear a huge amount of civil compensation liability,which is far stronger than the warning effect of administrative punishment on the relevant subjects,It can also make up for the loss of investors,which is in line with the interests of investors.