Research On Legal Issues Of Depository Receipt Investor Protection

Depository Receipt,which originated in the United States,is an innovative financial financing tool gradually derived from the American market because of the strong financing demand of overseas issuers.Depository receipts have low cost and strong financing ability,which can quickly improve the popularity of a country’s enterprises.The prosperity of depository receipts will stimulate the vitality of the market and promote economic development.Therefore,China has accelerated the implementation of the depository receipts system.In June 2018,the CSRC issued the Administrative Measures for the Issuance and Trading of Depositary Receipts(Trial)(hereinafter referred to as the "Administrative Measures"),which made specific provisions on the regulatory rules and information disclosure of depository receipts.In the newly revised Securities Law in 2019,the legal status of depository receipts was established,and it was regarded as a type of securities and accepted by China’s CSRC.In 2022,with the promulgation of the Interim Measures for the Listing and Trading of Interconnected Depositary Receipts between Shenzhen Stock Exchange and Overseas Stock Exchanges(hereinafter referred to as the Interim Measures of Shenzhen Stock Exchange),it further affirmed the cross-border financing function of depository receipts,and at the same time promoted the institutional two-way opening of the capital market.However,at present,the legal system of China’s depository receipts is not perfect,and the legal nature of depository receipts is vague and needs to be clarified.In the process of listing,there are still difficulties in false statements and cross-border supervision.At the same time,the excessive scope of the depositary’s authority will also lead to many investment risks for investors.However,the current law lacks relief and protection for investors.Once investors’ rights and interests are damaged,they will face unfair treatment such as difficulty in cross-border litigation and enforcement.Therefore,it is most important at present to ensure the stability of China’s capital market and safeguard the rights and interests of investors in China.Therefore,this paper mainly elaborates from four parts.The first part briefly introduces the concept,characteristics and development history of depository receipts in China.Only by first defining the connotation,types and characteristics of depository receipts can we deeply understand the superiority of depository receipts and understand the reasons why our country vigorously develops depository receipts.Although China started nearly a hundred years later than the United States,the curtain of depository receipts system in China has been opened until today.In just a few years,the development and improvement of China’s depository receipts are fast,and the successive promulgation of relevant laws and regulations also shows that depository receipts are undoubtedly the focus of the capital market.Secondly,it is necessary to clarify the operation mechanism of China’s depository receipts and the legal relationship between participating subjects,analyze the possible risks in the operation of depository receipts,and sort out the attributes of the legal relationship among various subjects.In the second part,by combining the operational mechanism and legal nature of depository receipts,the author puts forward the drawbacks and hidden dangers in China’s depository receipts system,such as inadequate supervision,wide range of rights of depositors,and few relief channels for investors,etc.,and then analyzes the possible damage consequences of investors according to the causes of the problems.The third part refers to the advanced practical experience of the United States,compares the defects and loopholes in China’s depository receipt system,and sums up the solutions to investor protection in the United States,such as setting up a hierarchical registration system,cross-border supervision through the principle of"long-arm jurisdiction",flexibility of information disclosure standards,and establishment of investor redemption right system.Finally,it explores ways that can be adopted and absorbed by China,and turns them into perfect suggestions with Chinese characteristics that meet the needs of China’s national conditions.Finally,in the fourth part,propose appropriate solutions to each depository receipt investor protection issue,including establishing a risk supervision mechanism for cross-border cooperation,formulating a flexible hierarchical supervision system,standardizing the rights of depositors,stipulating the information disclosure obligations of depositors and custodians,improve certain individual rights of investors,and requiring overseas issuers to set up cross-border litigation agencies in China,so as to implement the protection of investors in depositary receipts,thus creating a harmonious and stable investor protection environment and promoting the prosperity and development of China’s capital market.