Study On Fund Custody System In China

In fund custody industry in China, custodians never find or disclosure fund managing entities' abnormal operating behaviors, almost describing their operations as conformity with rules. At the same time, the mice storehouse and other illegal activities in fund occur from time to time. It can be said that custodians are not functioning adequately in supervising fund managing entities, which may cause damages to the interests of fund investors.It is necessary to find factors influencing the fulfillment of custodians' responsibilities and ways to perfect the custody system. Then, the rights of inventors can be protected and fund custody industry can stay steady.Article is divided into six parts. By tracking back the history of custody industry, looking at how it started and different regulations concerning custodians both at home and abroad, it gives a full description of current situation of China with reliable statistics. By contrast, it discusses the flaws of system design of present custody industry. Firstly, strict admittance to the market results in a market structure of monopoly industry. Secondly, custodians are not empowered to be independent to supervise fund managing entities and meanwhile lack adequate capacity on supervision. Thirdly, the legal systems haven't granted custodians sufficient rights to safeguard the interests of investors. Besides, custodians shall not perform their duties conscientiously behind the invalidity of external supervision.To tackle these problems, the article recommends the following measures to-improve fund custody system. Firstly, ease the entrance requirements to custody industry and establish a competitive market. Secondly, increase the independence of the custodian to reduce conflicts of interest.Thirdly, custodians should be allowed more power to fully strengthen their role of supervision.In addition, custodians are expected to improve supervision quality.