On Legal Rights Protection Of Holders In Cross-border Indirectly Holding System

The protection of the legal rights the holders is the cornerstone of the prosperity of the securities market.In recent years,China has paid increasing attention to this issue.However,in practice,achievements in this area are not satisfactory.In particular,the research on the cross-border indirectly holding system of securities,a not popular mode,is seriously insufficient,and the way to protect the legal rights of holders needs to be improved.The indirectly holding mode has the advantages of high efficiency,low cost and large transaction scale,especially when it involves cross-border factor.However,the indirectly holding system also brings inevitable risks to the legal rights of holders in the cross-border context.Except for information disclosure,false representation,and market manipulation,the challenging legal issues holders need to face mainly include two aspects.One is the risk of the substantive law,and the other is the risk of the conflict of laws.The risk of substantive law is mainly due to the fact that in the crossborder indirectly holding system,due to its special structure,the holders cannot actually control the securities they own,and the securities of many holders are mixed,while the "Property Law" and "Contract Law" in the traditional civil law theory are not able to regulate them,and the holders are often only able to obtain the right of obligatory claim without any priority.When the intermediary’s own assets are insufficient,the holders are likely to lose their fortune.And because the holders’ property is nominally recorded in the name of the intermediary,when the intermediary’s property is liquidated or executed,the holders` property is also likely to be liquidated or executed.Therefore,in order to protect the legal rights of the holders,it is necessary to identify the nature of their legal rights in order to confirm the rights and obligations of all parties,and to ensure that the rights of the holders are separated from the intermediary and are not affected by the bankruptcy and other risks of the intermediary.Besides,holders can protect their rights in accordance with law when the holders’ securities are improperly disposed.The main reason for the risks under the conflict of laws is that in the context of cross-border,the current uniform substantive law,the UNIDROIT Convention on Substantive Rules for Intermediated Securities,has not yet entered into force,and the conflicts of laws of various countries are inevitable.The characteristics of the cross-border indirectly holding model leads to the difficulty in applying the traditional private international law theories,such as lex situs,so a more effective law need to be enacted.At present,in order to deal with the risks of substantive law,various countries have established different theories to identify the nature of the legal rights of holders.For China,the identification method under the security entitlement in the United States is more effective and more suitable for practical conditions in China,and more suitable for the protection of the legal rights of holders.For the risk of conflict of laws,the PRIMA principle is undoubtedly the most effective way to deal with it at present,while for the convention on conflict of laws,Convention on Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary is not suitable for China to enter at present because of its high enforceability.