Study On The Improvement Of Legal System Of Contractual Fund Custodian In China

In recent years, our country's securities investment fund industry is enjoying strong momentum of development, but behind the prosperous market there are many illegal operations and improper managements. The continually exposing of inside story of Fund and illegal events not only attack investors' trust and cause crisis of confidence, but also expose the regulating loopholes and potential risks of the securities investment fund market. These questions are definitely related to the Market players' lack of credit, the lower degree of maturity of fund market and the weak government regulation, but the failure of fund's internal supervising mechanism is more to blame. In addition to the widespread lack of supervision of fund holders in various countries, the fund custodian as the representative of fund holders' interest in our country, who supervises by non-interference and inaction is the main reason of the failure of fund's internal supervising mechanism. At present. Fund custodian's weak supervision is related to the defect of fund custodian's legal system. Therefore, researching fund custodian's legal system in our country, finding the obstruction of legal system which leads to the effectiveness of supervising and making up the defect of the system are significant to urge the fund custodian to perform their duty actively and change the undesirable situation that the fund operator can escape from the legal punishment even if they misuse their power.By the way of empirical analysis, the economic analysis as well as comparative analysis, this paper conducts research on the legal issues of the trusteeship of contractual securities investment fund, draws on institutional economics and other disciplines' theoretical achievements and launches discuss in accordance with cases of security market, fund contracts, trust agreements and other materials. On one hand, this paper analyzes and studies the legal systems of contractual fund custodian in representative countries, compares their advantages and disadvantages to explore the reasons for their design. On the other hand, makes detailed analysis of the problems of fund custodian's legal system in our country and the reason leading to the problem. Then combining with China's national conditions and international experience, the paper suggests that fund custodian's supervisory function should be strengthened in the governance of our country's contractual fund and puts forward the concrete proposals on how to improve the legal system of custodian in our country. The paper divides into four parts.The first part is the outline of securities investment fund custodian. Briefly introduce the origin and development of domestic and foreign securities investment fund custodian first. Then explore the reasons of the establishment of fund custodian and illustrate its important role in the fund's internal governance from the perspective of economics and combined with the trust theory, the principal-agent theory and the incomplete contract theory in institutional economics.The second part analyzes legal system of foreign contractual fund custodian. This part studies the strict regulations and its reasons about the establishment, the replacement and the retirement of fund custodian in various countries and regions firstly. Then comparatively analyzes the different legal status under four different contractual fund models in Japan, Germany, the United Kingdom and India, in hoping that in the later part it is useful for the improvement of our country's fund custodian system. Also in accordance with other countries' legislation, this part summarizes the fund custodian's main duties as follows: guaranteeing fund assets' security and independence; taking charging of fund assets' liquidation and auditing financial matters; supervising fund operator's investment operation. Finally, a conclusion is made that every well-governanced fund has an oversight entity in the Fund's internal which can protect the fund holders' interests and restrict fund operator effectively. The choice of the entity as the internal first-line supervisors must be made depending on fund industry's actual situation in each country.The third part makes an overall analysis of our country's current situation of fund custodian from the aspects of appointment of fund custodian and its legal status, custodian's main responsibilities and its obligation and legal liability. Then the writer draws to a conclusion that the present legal regime has not realized the legislator's predictable effect, because of the slacked supervision, fund custodian has not been able to restrict fund manager and protect the interests of fund holders. This part also discusses respectively the issues of standard of establishment, appointment mechanism, the nature of supervision, the delegation of supervisory authority, fiduciary duty, legal liability and the incentive mechanism of fund custodian. At last, the writer makes a conclusion that although current fund custodian system has defects, but there is still some room for improving and no need to introduce the committee of trustee or set up fund board of director as some scholars has proposed.The fourth part firstly proposes that the core of the improvement of fund custodian system is to strengthen the custodian's supervisory ability to bond the manager and urge the custodian to be able to really represent the interests of the holders. Then drawing on the standard of IOSCO's "independent oversight entities" to identify our country's defects of custodian, combing other countries' fund legislative experience with our country's specific conditions and focusing on the problems mentioned in part three to put forward the concrete measurements to improve our country's legal system of fund custodian.