The Legal Analysis On Protection For Investors Of Chinese Depositary Receipts

As a financial derivative,Depositary Receipts are widely used because of the ability to issue cross-border financing.China Depositary Receipt(CDR)can not only serve the new economy,but also promote the internationalization of the capital market.At the same time,it can meet the diversified investment needs of investors and promote the two-way circulation of Chinese capital.However,under the current legal system,there are legal and regulatory risks in the promotion of CDR.It is necessary to solve peoblem,such as investor identity,issuer identification,information asymmetry and jurisdictional conflicts in order to protect rights of investor.In order to construct and improve the investor protection mechanism,it should be analyze the attributes of the depositary receipt derivatives and to clarify the mutual legal relationship between the underlying securities issuer,the investor,the depositary institution and the custodian institution and their respective legal responsibilities.The depositary receipt is an equity certificate,the issuer of the underlying securities is the actual issuer of the depositary receipt,and the investor is the nominal shareholder of the issuer,and the entitlement is subject to the depositary agreement.The depositary agreement includes the trust legal relationship and the anonymous investment holding relationship.Investors and issuers have conflicts of interest.In order to protect vulnerable investors,it is necessary to set investment thresholds and improve the investor suitability system.The transaction structure of depositary receipts involves five major entities involving domestic investors,depositary institutions,underwriters,and overseas basic issuers and custodians.The operational mechanism is complex.The price-earnings ratio of domestic and overseas foreign exchange markets is quite different,which is easy to cause arbitrage risks.According to different types of depositary receipts,different issue threshold requirements are imposed on the issuer.The depositary institution shall be obligated to pay attention to the investors.If there is fraudulent behavior in the issuance process,the overseas issuing company shall bear full responsibility,and the depositary institution shall act as the nominal issuer and assume the fault of presumption of fault.To effectively solve the problem that investors cannot directly file a lawsuit,China must legislate to clarify the path for investors to file a company lawsuit,and must force foreign issuers to set up litigation agents in China.In addition,the depositary receipts have cross-border nature,and the domestic and overseas regulatory rules are different,which may lead to conflicts of legal rules.In order to solve the problem of information asymmetry,we draw on the share-based information disclosure mechanism of overseas issuers and depository institutions of United States,clarify the obligations of overseas issuers and depositary institutions,and clarify the remedies for the violation of the legitimate rights and interests of investors.Group protection mechanism and class action mechanism;in order to effectively solve the jurisdictional issues in depositary receipt transactions,improve the coordinated and unified regulatory cooperation mechanism.