Research On The Establishment Of Independentdirector In China Fund Management Companies

The governance structure of contractual funds (the major type of funds in Chinese Securities markets) is theoretically perfect. However in practice, investors cannot sufficiently superintend the fund management companies in that the superintendence channel is hard to be efficiently established. Because of the inefficient supervision by law, imperfect market mechanism and the weak self-control system of the fund companies in our country, fund companies, fund manager or the interests-related parities of funds may take advantage of the benefit of fund holders to invest in the interests of former parties.In 2001, to protect the interest of the investors and standardization of fund operation, CSRC(Chinese Security regulation committee) required all of the fund companies to introduce independent directors into their directorates at a ratio of 1/3 at least. But the committee didn't give the clear guide about how to put the system in practice and actualize its duties. Meanwhile, the system is introduced to the fund companies first. So how to establish a competent independent director system as that in U.S is worth to discuss.The article details the governance structure of funds, operation of funds, and management of fund management companies and finds out the institutional inducement that leads to the continuing dishonest investment in China. According to the independent director system in mutual funds of USA and management modes in U.K, German, and Japan, the author draws a conclusion that, in management company, independent director's committee, made up by independent directors, should be established to protect the fund holder's interests, and the goal of the committee is to regulate the companies. In addition, the author suggests that fund Company's institutional framework should be meliorated. At last, the committee can carry out daily supervision of investment. These are exactly innovation of this article too. In order to guarantee the supervision validity of the independent director's system, this article has dealt with independent director's independence, salary, responsibility, and power distribution.It is significant for fund development to strengthen the regulation on fund management companies and safeguard the fund holders' benefits. The article addresses the above topic; therefore it is meaningful to the practice of managing fund management by independent director.