Warrants Legal Regulation

On September 26, 2006, the WFF announced《2006-2007Global Competitiveness Report》, China ranks 54th, declining 6compared to the ranking in the last year. One of the main reasons for thedeclining is that the self-innovative capability of our country is so weak.In order to foster self-innovative capability, one of the key conditionsis the powerful support from the capital market that is deemed as thedistribution (allocation) of resources. As early as State Council released《Some Opinions on pushing forward the reform and stabledevelopment of the capital market》on January 31, 2004, accordingto it, our capital market need to establish a sound capital marketsystem, enrich securities investment products, emphasize theestablishment which takes market as a predominant species creativemechanism and study new products and derivatives related to stock andbond.As an innovative financial tool and derivative product of securitiesof a kind of unique function, the warrants has been developing rapidlyand found favor in the eyes of investors. Along with the creativestrategic implement of our country, financial creative is in line with ofthe native capital market and international capital market, leading thewarrants into the native capital market is inevitable. In the 1990s,Shanghai and Shenzhen stock exchange in our country had ever releasedthe warrants, but because of the excessive speculation in the market, itwas close by the government. Its main reason is that there is no asuitable set of law which can match it. In order to build up one fair,transparent and orderly market and to protect the rights of massinvestors, how to regulate the warrants should be the issue in thesecurities law area. Currently, the domestic research on the warrantsmainly concentrated on the economic function, meaning and themeasures of regulating the warrants in the foreign countries etc. thediscussion on the legal regulation is rare. In light of this, this thesis discussed mainly surrounding the legal regulation, at the aim to putforward some constructive suggestions.This thesis is totally divided into five parts:The first part mainly introduces the basic knowledge concerningthe warrants. Firstly, the connotation of the warrants is generalized; thecharacteristic of the warrants is discussed in the aspect of law, thensum up: the warrants is a kind of covenant which is of the characteristicof both option and security but is different from option and security.Secondly, according to different standards, the warrants is classified.Thirdly, the three main functions of the warrants are explored. Finally,the warrants history source and present developing state is introduced.The second part introduced, the present state of native market, andthe necessity and great significance to promote the warrants product.Currently, the native warrants market is still under the preliminaryconstruction and release the warrants just for the sake of serve inownership of share cent place reform. For many years, the species bevery unitary, limiting the maturity of market and develop. In thiscontext, the wish to self-innovative is becoming so strong. It's the righttime, with ownership of share cent place reform and financialinnovation for chance, taking the warrants product into the nativecapital has great significance.The third part elaborated the basic principle of the warrants productlaw rules and regulations, mainly discussed the content, necessity ofthe legal regulation and the choice of the mode. The legal regulation is akind of method of the regulation, because the regulation is toopre-eminent, the administration means are often used, so this thesischose the theory of the legal regulation and emphasized on using legalaction. According to the risk characteristic of the market of thewarrants, to raise efficiency of the market resources allocation andprotect investor of benefits, the legal regulation is very necessary. Thelegal regulation mode of the stock market mainly has three kinds,namely punish after the event, materiality reviewing before the event and full disclosure mode, by comparing advantages and weaknessofthese three kinds and combining the actual circumstance of nativestock market, the materiality reviewing has certain rationality andreality, but should constantly absorb check reasonable that the fulldisclosure has.The fourth part introduced the overall regulation situation of thedeveloped market, mainly in Hong Kong, EU, Singapore and Taiwandistrict. Hong Kong is the global biggest warrants market, the EU isthe source of the warrants, meanwhile Singapore and Taiwanese areunusually active as a newly warrants market. The legal regulation ofthese four greatest warrants market provided a blue origin for nativewarrants market.The fifth part is the core of this thesis. It mainly discussed the legalregulation of native warrants market and how to perfect, andconfigured the law system of native warrants market in the law systemof native stock market. Secondly, it introduced the concrete law systemof the warrants, including the issuing, listing and procedure of thewarrants, disclosure and the risk control etc., and draw lessons fromthe law system of above-mentioned four greatest warrants market, andput forward some suggestions of complement and modification aroundShanghai and Shenzhen stock exchange's temporary manage way of thewarrants.