On Duty Of Diligence Of Investment Bank

As the most important intermediaries in the securities market,Investment banks are viewed as a bridge between issuers and investors which plays an important role in guaranteeing the quality of issuers and maintaining investor confidence.It has been called the "gatekeeper" in the securities market.However,reality is not as idyllic as it is.In recent years,whether the United States and other developed counteies or regions,Or newly-emerging nation like China,fraudulent conduct often have resulting in great losses of investors' interests.An important reason for this situation is that investment banks fail to fulfill their duty of diligence.The purpose of this paper is to sort out the origination of the duty of diligence of investment banks,Searching for advanced experience of relevant countries or regions in criterion for judgement,realization mechanism and legal liability system of duty of diligence of investment banks in order to solve the problems in China,and to urge our investment banks to maximum probability and fulfill their duty of diligence.It not only protect the interests of investors,but also promotes the healthy development of securities market in China.The dissertation is divided into three parts,including introduction body and conclusion.The body contains five chapters.The introduction has a detailed description on the current research situation of duty of diligence of investment bank at home and abroad that starting from the background and significance of the thesis,expounding the ideas and methods of demonstration,innovation and practical significance in our country.This body part discusses the basic theory,criterion for judgement,realization mechanism,legal liability of duty of diligence of investment bank,and the evolution,problems and perfection of our duty of diligence system of investment bank.The chapter 1 focuses on the basic theory of the duty of diligence of investment banks.At present,there are divergences in the understanding of the nature of duty of diligence of investment bank.In fact,duty of diligence of investment bank essentially came into being based on fiduciary relationship,which belongs to the category of duty of care and the unity of legal obligation and moral obligation,the establishment of the duty of diligence system of investment banks is closely related to the outbreak of the financial crisis and has been perfected in the process of dealing with the financial crisis.Its inherent incentive lies in the acquisition of business opportunities and avoidance of their own risks.This paper discusses that investment banks are entrusted to the duty of diligence by political science,economic analysis of law and legal principle,explaining the duty of diligence entrusted to investment banks which is the result of the interaction of political,legal and economic factors.It is not only the requirement of the limited government,but also the most real and complete effect of realizing information production with the lowest transaction cost,especially the function of the principle of equality and the equivalent of rights and obligations.The chapter 2 discusses the criterion for judgement of duty of diligence of investment banks.The criterion for judgement is yardstick that whether the investment banks fulfill the duty of diligence.It is the standard of behavior,universality,combination of abstraction and concrete in nature.Moreover,it can make up for the loopholes in the behavioral rules of investment banks,and clarify the boundaries of behavior and reasonably distinguish the responsibilities between investment banks and other subjects.At present,the criterion for judgement include prudent person standard and reasonable person standard.The former is mainly applicable to the United States,while the latter is applicable to other countries or regions except the United States.The emergence and development of the two standards are historically inevitable.the two standards have the sense of principle and the flexibility,the connotation is quite different,so that safeguard the interests of investors and healthy development of the securities market.The chapter 3 discusses the realization mechanism of duty of diligence of investment bank.The realization of the value goal of the duty of diligence system of investment banks needs a system of mutual restriction and supplement.Therefore,the internal and external factors,incentives and constraints,costs and benefits should be taken into account in the construction of the realization mechanism of duty of diligence of investment bank.It can be divided into internal and external realization mechanism,incentive and constraint realization mechanism.The incentive mechanism such as salary and promotion mechanism,reputation mechanism and gatekeeper supervision mechanism that has the effect of making investment banks more due diligence.Constraint mechanisms such as the investment bank Public enforcement mechanism,private execution mechanism,internal restraint mechanism,payment mechanism of underwriting cost,media supervision mechanism,etc.It can demonstrate the role of investment banks in avoiding opportunistic behaviour as much as possible.but each of the realization mechanism is more or less deficient,it can exert the biggest effect by the incentive mechanisms of duty of diligence of investment bank cooperate with restraint mechanisms.The chapter 4 studies the legal liability of duty of diligence of investment bank.Legal liability is an important guarantee for the realization of the value of legal system.The legal liability of duty of diligence of investment banks include civil,administrative and criminal responsibility.At present,there are divergences in understanding the nature of investment banks' civil liability.In fact,it should constitute tort liability.The investment bank can defend itself on the basis of the extinction of prescription,the intent of the claimant and the failure of causation,etc.It should be reasonably divided in the responsibilities between investment banks and issuers,other intermediaries and employees of investment banks.At the same time,because the system of administrative responsibility is fast and efficient,it is easy to fall into the path dependence.Administrative punishment should follow due process,emphasize the matching of punishment measures and illegal acts.In addition,it will be prosecuted for criminal responsibility while only investment banks that violating the duty of diligence caused particularly serious consequences.The chapter 5 discusses the evolution,problems and perfection on the duty of diligence system of investment banks in China.The duty of diligence system of investment banks in China has gone through approval system,channel system and sponsor system.Although the duty of diligence system of investment banks has been perfected in each stage,The relatively perfection of duty of diligence system of investment banks has been established up to now.However,there are still some problems,such as vague and missing of criterion for judgement,insufficient incentive and Invalid Balance function of realization mechanism,The single and sharing unbalance of the investigation mechanism of legal responsibility,etc.In fact,developed securities markets have experienced these problems,having mature experience and measures to solve them.China should improve the duty of diligence system of investment banks by reshaping the regulation idea,reconstructing the Criterion for Judgement,perfecting realization mechanism and optimizing legal responsibility system.Conclusion summarizes the contents of the full text.The duty of diligence system of investment banks includes criterion for judgement,realization mechanism and legal liability,etc.It is significant that whether each specific system is perfect and effective to the value realization of duty of diligence system of investment banks.We should improve relevant systems in time,promoting investment banks to actively fulfill duty of diligence,ensuring the quality of securities issuance,providing high-quality source water for securities market.