The Transition Of Japanese Financial Instruments And Exchange Act And The Enlightenment For Chinese Financial Services Act

It’s been36years since the reform and opening up of China, and the centralized and uniform financial system which is formed under the planned economy system is no longer fit the development of market economy. Under the circumstance of financial reform and financial deepening in China, it becomes an important issue to build up an open and competitive financial market and financial order which adapt to the market economy with socialist characteristics. At present, Chinese financial system, like that of Japan in the time of early post-war period, has showed up various maladjustment and disadvantages. Since1990s, Japan started its financial reform which is called "Big Bang", and in2006Japan announced Financial Service Laws, i.e."Financial Instruments and Exchange Act".The build-up of Japanese financial legal system has experienced four periods, i.e. before World War II with no enactments, after World War II with Securities Exchange Act, the period of financial reform and the period of Financial Instruments and Exchange Act. Through successive reforms, Japan eventually built up a lateral legal system of financial services, and realized the transition from Securities Exchange Act to unified Financial Commodity Exchange Act. Professor Kanda Hideki believes that Japan needs to establish a legal system to protect consumers, and he proposed four pillars of the financial legal system. First, Japan shall standardize the investment service rules; second, Japan shall improve the disclosure system; third, Japan shall ensure the legal, independent and proper operations of exchange; fourth, Japan shall enhance the punishment rules of the penalties. Japan practiced highly-centralized financial system protected by government after World War II, but this system becomes in conflict with Japan’s financial development at home and abroad, and the interests of consumers cannot be effectively guaranteed. There are four core elements in financial reform. First, it’s the change of regulated object, i.e. expand from original "securities" to "financial products" which includes various investment products and financial derivatives. Second, it’s the change of legal framework, i.e. the change from the original longitudinal dispersion mode to unified legal system with the mixed-industries development mode. Third, it’s the protection towards financial consumers with various methods, such as distinguishing retail investors and professional investors, replenishing financial sales laws, building up investor protection groups, improving disclosure system, enhancing penalties and taxes, and making financial regulations. Fourth, it’s the change of financial supervision system, i.e. change from the system centered in finance ministry and Japanese bank to unified regulatory system leading by Financial Service Agency.Recently, with the new development of financial innovation and financial globalization, cross-industry management and comprehensive management have become a common form of the financial service industry worldwide. To meet this requirement, the global financial service legal system shows up four trends. First, it’s the integration of financial service legality. Various countries have started to adjust the financial regulations related to financial products as fully as possible. Second, it’s the set-up of a unified and functional financial supervision mode. Independent supervision institutes with clear functions have been set up by many countries. Third, it’s the transparency and justice of transaction acts. All the countries start to pay more and more attention to disclosure and sales conduct codes. Fourth, it’s the financial protection for investors, accurate definition of financial consumers, and the set-up of specialized consumer protection agency.Based on the investigation and demonstration of the development and reform of the Japanese Financial Services Act, Chinese form of financial legal system shall be developed through building up unified legal system for financial service, reforming financial supervision mode, building up transparent and justice regulations and enhancing the protection for financial consumers. China shall realize the legislative purpose for consumer-protected financial service through building up lateral and unified legal system for financial service, independent and functional financial supervision mode, and transparent and justice sales regulation for financial products.