A Study On Legal Issues Of Protecting The Interests Of Fund Investors

Stock market is a crucial element of the world economics and the securities investment in fund is the most important institutional investor. Fund can promote capital collection and circulation and increase effectiveness of its allocation, so as to help the growth and development of the world economy. Fund has the characteristics of collective financial operation, professional management, lowering risks, sharing profits, etc. This kind of investment is very popular with investors, so it is one of the ways to manage their money. It is 18 years since fund industry in our country started. It has experienced ups and downs in its development. One typical example is that in the year 2000 the whole field got into trouble because the dirty tricks in the area were uncovered. In 2003, however, after a law of securities investment and fund was enacted, fund industry has started to follow a normal and legal track and gradually developed into a financial giant with the total of hundreds of billions of RMB. Since fund industry in our country has just started, there still exist many problems, such as various infringements on fund investors' interests, difficulties in getting any compensation for their losses. This has hurt the enthusiasm of investors for putting their money to the stock market and in turn hindered the order and prosperity of the market. "While the waters can bear the boat, they can also sink it." If investors have been suffering losses and their interests cannot be protected, fund industry will vanish, for stock market cannot exist without investors. And then our stock market and even the world economy will undergo a disaster. Therefore, protecting the interests of investors should be the priority task in the improvement of the social legal system. The present paper, by analyzing the cases that fund investors have suffered losses and by studying the related domestic and foreign legislations, attempts to explore a system which can standardize the action of fund managers and protect the interests of fund investors, so as to foster an orderly and sound development in fund industry in our country.This thesis first introduces the widely known illegal Insider Trading Case in China International Fund Management Co. and the world-wide known fund fraud, Bernard Madoff scheme, and then makes a detailed analysis about how the fund managers sacrifice the investors' interests to make profits illegally. Then it further illuminates some concepts and judicial relations relevant to securities investment funds. By studying securities and fund legislation in foreign countries, the following chapter enumerates various illegal acts concerning how fund mangers make a profit by damaging the investors' interests, including insider trading, self-dealing, related-party transaction, joint transaction, unlawful agency trade, "weaker dollar" act and unfair treatment. All these acts have their own implementing subjects, behavior modes, social harmfulness, motives and conditions. Through the analysis of the cases, the thesis exposes that the causes of the illegal acts are manifold, among which two are important. First, due to the immaturity of the regulation and supervision system of the fund industry, it is difficult to investigate and verify the unlawful acts; second, when damages occur, it is difficult to obtain civil compensation. In the last part, on the basis of analyzing the cases and studying the related foreign legislations, the author designs a relatively complete scheme to protect the investors' interests. First, prevention in advance. Through refining legislation, trust liability of the fund manager as a trustee should be regulated, and a set of rules should be enacted in regulating the activities of the related subjects including fund companies in order to make them comply with the following sub-liabilities: conflict prohibition, profit-making prohibition and honesty liability. Second, supervision and control in the process of transaction. The supervision and control system should be improved inside and outside, by making use of every kind of regulation to bring stock exchanges, law firms, and investors into the supervision and control system of China Securities Regulatory Commission so as to solve the investigation and verification problem. Third, compensation afterwards. Group litigation mechanism should be designed to protect the investors' rights and interests through civil procedure, and the system for garnishing compensation property should be improved as well to ensure the investors being compensated after winning the litigation. The author sincerely looks forward to contributing to the development of the fund industry and establishment of the socialist legal system in China through enumerating and analyzing the illegal cases in the fund industry, and putting forth some countermeasures in protecting the investors.