The Conflicts Of Interest And Legal Regulation In Securities Investment Fund

As a very important content of securities investment fund law, conflicts of interest bring about tremendous risks to the interest of investors. To make out effective rules to regulate the conflicts of interest is a wish of every country. This thesis dissertates the interest conflicts in securities fund as well as its legal regulation fron three aspects:Chapter one has two sections, the first section clarifies the reason of interest conflicts in securities investment fund. The root reason is the separation of ownership and management, in this situation, the aim of investors and the aim of fund manager are different. The different aims contain internal conditions of the emergence of interest conflicts. Another important reason is the grave information asymmetry between the investors and fund manager. We can find asymmetric information everywhere, but it is graver in the fund market. In this situation, the investors have great difficulties to supervise the fund manager, then it is possible that the fund manager will operate the fund only for their own interest. The second section discusses the law reason to regulate interest conflicts in securities investment fund. Fiduciary duty comes fron equity law, it contains duty of loyalty and duty of care. This section talks about the regulation model and fundamental policy of fiduciary duty. Next the thesis studies duty of loyalty. Duty of loyalty requests fund manager must operate fund only for the interest of investors not for theis own interest or other people interest. The fundamental reason why the law regulates the conflicts of interest in securities investment fund is that the fund manager breach the duty of loyalty based on their status in the legal relationship of fund.Chapter two studies the legal regulation of interest conflicts in securities investment fund. The auther firstly introduce the customary legal regulation of interest conflicts in securities investment fund, which contains three kinds: market system, compulsory disclosure of information and forbidding all conflicts of interest. Each kind has both negative and positive influence, so most countries use multisystem, even though they have different emphasis. Affiliated transaction and fund management fee are the important forms of the interest conflicts. The thesis introduce the forms of interest conflicts: principal transaction, joint transaction and agency transaction. Then the auther analyses the scope of affiliated persons, and introduce the legal regulations of American, Japan, Taipei region of China and Hangkang region of China. In view of the negative and positive influence of affiliated transaction, most countries and regions prohibit it, and meanwhile make a difference to some of them. The next content is the fund management fee and its legal regulation. Usually there are three methods to claim fund management fee: the first one is that the price of management fee is based on fund market, the second one is that the price of management fee is decided by the administrative department, the last one is judicial rate making. The thesis talks about the fund management fee of American fund law with emphasis: first, the fund manager must disclose the fund management fee situation; second, American fund law rules that the fund manager has fiduciary duty for the investors. The reasonableness of the management fee is an important standard to judge whether the fund manager breach fiduciary duty.Chapter three firstly probes into the current situation of interest conflicts legal regulation in our country. The present laws regulate the conflicts of interest from the following two aspects: first, prescribing the fund manager has the duty of good faith, caution and diligence,and forbidding the fund manager to do securities transaction which are bad for the interest of investors; second, forbidding several usual forms of interest conflicts. The second section studies the improvement of interest conflicts legal regulation in our country. On the base of the practice of securities investment fund in China as well as the experience of other countries or regions, the auther suggests the following measures: firstly, nailing down the fiduciary duty of fund manager. The current laws prescribe the duty of good faith, which are different with fiduciary duty. It is only when the law regulates the fiduciary duty clearly that shrotage of prescribing the specific forms of affiliated transaction can be made up. Secondly, prescribing the scope of affiliated persons. Affiliated transaction is the important form of the interest conflicts between fund holders and fund manager, a clear scope of affiliated persons has great thing to do with regulating affiliated transaction. Thirdly, nailing down the disclosure of information of affiliated transaction, which is an effective method to regulate affiliated transaction. Fourth, it is necessory to let the investors have rescission property. Fifth, strengthening legal responsibilities of fund manager. Sixth, improving fund civil action mechanism. Seventh, building independent trustee committee, which act for the interest of investors. The improvement of fund management fee regulation include two aspects: first, the fund manager should assume fiduciary duty in the fund management fee; second, performance pay system should be rationlized.