Research On Legal Issues Of Protection For Depository Receipt Investors

Depositary Receipt(DR)is a multinational financial instrument that refers to a transferable certificate issued in a country that represents the security’s interests of an offshore company.DR came out in the United States in 1927,and has developed greatly with its huge advantages in facilitating investment and financing and promoting the internationalization of securities.China’s mainland capital market has just introduced this financial product,but deficiencies of the basic system and legal terms lead to considerable risks to Chinese DR investors.This paper mainly analyzes the system of DR and risks which DR investors may face,then proposes relevant suggestions for constructing the protection mechanism for Chinese DR investors.In addition,this paper mainly discusses the risks of DR and the protection of investors’ interests in China’s mainland capital market.Considering the simplicity of words,if there is no special explanation in the text,“China” refers to China’s mainland capital market.This article consists of six parts.The part of introduction introduces the research background and purpose,the research status and innovations,and the research methods used in this paper.It is especially emphasized that Chinese securities investors,especially public investors,are weak in tolerating and resisting risks in the securities market.In face of this new and complicated financial instrument,investors’ rights are more likely to be threatened.It is necessary to construct the protection mechanism for DR investors and give them special protection.Chapter 1 is an overview of the basic system of DR.It introduces the concept and characteristics,origin and development of DR,and analyzes the subject and operation structure of DR so that clarifying the business practice background of the research objects.Chapters 2 and Chapters 3 specifically expound the foundation of the protection institution of DR investors.Chapters 2 analyzes the special mechanism risks of DR.First,China’s foreign exchange control hinders the conversion mechanism between DR and its underlying securities,which infringes upon investors’ right of free and fair dealing.Second,the foreign-related nature of DR expands the phenomenon of information asymmetry,violating investors’ right to know.Chapters 3 discusses the particularities of the protection for DR investors.First,the legal status of DR investors is unclear.Second,the complexity and professionalism of DR bring new challenges to China’s securities regulatory agencies,but the existing regulatory systems and regulatory capabilities are insufficient to counter the challenges.Third,DR investors do not have effective ways for their claims.Chapters 4 analyzes relevant systems of the protection for DR investors in the United States and Taiwan province from an empirical perspective so as to further discuss the construction of Chinese DR investors’ protection mechanism.Chapters 5 proposes several suggestions to construct the protection mechanism for DR investors from the following aspects.Firstly,the conversion mechanism of DR should be established.Secondly,we should improve the information disclosure system for DR in order to guarantee investors to make investment decisions independently.Besides,the legal status of DR investors should be defined as beneficiaries of commercial trust.Moreover,China’s securities regulatory agencies must strengthen cross-border supervision and cooperation,and improve the market supervision level for DR.Finally,it is also important to improve the investor rights protection legislation and increase the rights exercise and rights relief measures for DR investors.The part of conclusion summarizes the whole article and points out that DR investors protection is a systematic project,which requires various systems to work together in order to provide investors with comprehensive and multilevel protection.