Original title: The "Profits and Losses" of the New "Securities Law" amendments
December 28, 2019, Standing Order of the 13th National People’s Congress The 15th meeting of the committee passed the newly revised "Securities Law of the People's Republic of China" (hereinafter referred to as the "Securities Law").
This law was passed by the Standing Committee of the Ninth National People’s Congress on December 29, 1998, and has been implemented since July 1, 1999. It has been 20 years since then. In the meantime, it has undergone three amendments in 2004, 2013, and 2014 (only a few terms and text were revised) and the first amendment in 2005 (substantial amendments). This amendment laid the foundation for the current "Securities Law" that has been applied so far. "frame.
This amendment is the second amendment. The revised "Securities Law" has 226 articles, 14 fewer than the 240 articles in the 2005 edition of the Securities Law. Two chapters, "Information Disclosure" and "Investor Protection" have been added, and more than 100 articles have been revised. It can be regarded as a "big change".
1. The history and background of this round of amendments to the Securities Lawp>
This round of amendments to the Securities Law started in 2013 and was submitted to the Standing Committee of the National People’s Congress for the first time in April 2015. Judging from the first review draft, there have been some major breakthroughs in the definition of securities, securities issuance, and supervision of securities companies, which can be regarded as a relatively "radical" reform. However, the stock market crash in June 2015 interrupted the revision process. Since then, the second review manuscript submitted for deliberation in 2017 has abandoned the relatively "radical" revisions of the first review manuscript, especially the first and second chapters that are almost untouched. After a lapse of two years, the third review draft published in April 2019 can be regarded as a sigh of relief from the stock market crash. In addition, the pilot registration system for the science and technology board has been launched, so a special section stipulates the registration system for the science and technology board. Some exemptions for securities issuance in the first review draft are retained.
After six years, the amendment to the Securities Law was finally passed successfully. Judging from the final revision of the Securities Law, this revision is compared with the third-reviewed draft.
In terms of securities definition, registration reform, investment Breakthroughs have been made in terms of protection and punishment of violations of the law, but there has been a "regression" in the issuance of securities, which can be regarded as a relatively "moderate" revision.
This round of "Securities Law" revisions coincides with China's economic reform entering the "deep water zone." Supply-side reforms and resolving financial risks are the goals of current economic reforms, and expanding the proportion of direct financing is an established policy tool of the central government. As the fundamental law governing direct financing, the "Securities Law" is responsible for protecting investors and facilitating corporate financing. The full implementation of the registration system should be an important means to achieve the above goals. According to Xiao Gang, the former chairman of the China Securities Regulatory Commission: "The Party Central Committee has never paid more attention to the capital market as it does today!"
2. "Highlights" of the "Securities Law" revision
Overview of the revised "Securities Law", the core highlights are as follows:
The definition of securities is relatively expanded; the registration system is fully implemented; the level of investor protection is improved;The penalties for illegal acts.
1. Expansion of the definition of securitiesp>
Article 2 of the Securities Law defines the jurisdiction of the Securities Law. Compared with the original article, the revised Article 2 expands the definition of securities and expands the scope of application of this law.
Article 2 adds the third paragraph: "
Administrative measures for the issuance and trading of asset-backed securities and asset management products shall be stipulated by the State Council in accordance with the principles of this law
", which means that asset-backed Securities and asset management products are regarded as "quasi-securities", and the State Council shall make special provisions in accordance with the principles of this law. The asset-backed securities and various asset management products issued in the asset securitization and asset management business are similar in nature to securities, but the original Securities Law did not include them in the scope of supervision. In practice, various financial and Quasi-financial institutions are designed and issued under separate supervision and supervision by various financial supervision departments. As a result, the supervision standards are different, which creates a lot of regulatory arbitrage space, and there is also a lot of supervision vacuum, which implies huge financial risks. The provisions of Article 2 Paragraph 3 of the "Securities Law" mean that the State Council is authorized to make special regulations on these two types of businesses, requiring that relevant regulations must comply with the principles of this law, that is, mandatory information disclosure and anti-fraud as protection for investors The main means. This may indicate that in the future, even if the two types of businesses are not included in a single centralized regulatory system, they will be relatively unified in terms of regulatory standards, thereby eliminating regulatory arbitrage and regulatory vacuum, and forming a more level playing field.
Article 2 also adds a fourth paragraph: "
Securities issuance and trading activities outside the People’s Republic of China disrupt the market order in the People’s Republic of China and damage the legitimate rights and interests of domestic investors, they shall be dealt with and be held accountable in accordance with the relevant provisions of this law.
". This means that the scope of the "Securities Law" is extended to foreign countries, and it is possible to pursue legal liabilities for acts that damage the rights and interests of Chinese investors and disrupt the order of the domestic market that occur overseas.
2. Fully implement the registration systemp>
After the "Securities Law" was revised, the registration system was fully extended to all public offerings of securities. The first paragraph of Article 9 of the Securities Law stipulates: "
Public issuance of securities must meet the requirements of laws and administrative regulations, and report to the Registration by the State Council’s securities regulatory agency or a department authorized by the State Council. Without legal registration, no unit or individual may publicly issue securities. The specific scope and implementation steps of the securities issuance registration system shall be prescribed by the State Council
The corresponding Article 12 has also made major changes to the company’s initial public offering of new shares: It can be seen that the revised Article 12 divides the company’s public offering of new shares into two categories: one is the initial public offering, or IPO, and the other is the issuance of new shares by listed companies. Listed companies no longer distinguish between public and non-public issuance of new shares. This is because according to the second paragraph of the revised Article 9, any issuance by a company with more than 200 shareholders constitutes a public offering. But strictly speaking, the scope of this article is not rigorous enough. Companies listed on the NEEQ are not listed companies (the securities listed in Article 46 are listed on the stock exchange), so this article cannot cover the securities issuance of companies listed on the NEEQ.
For IPO conditions, this article
changes the original "sustainable profitability" standard Modified to "sustainability"
will "the last three years of financial accounting documents No false records, no other major violations of the law" is revised to "The financial accounting report has been issued an unqualified audit report in the last three years"
, which is also a major revision in line with reality . Because it requires no false records in the financial accounting documents, it means that the authenticity of the financial statements in the application materials is a condition that must be met for the review. In fact, no matter whether it is an approval system or a registration system, it is impossible to guarantee the authenticity of the application materials-limited to Manpower, financial resources, and time limit, the authenticity can only be guaranteed through post-event accountability, and pre-review can only ensure relative truthfulness.
At the same time, the IPO conditions are added
The issuer, its controlling shareholder, and actual controller have not committed corruption, bribery, embezzlement of property, misappropriation of property, or undermining the socialist market economic order in the past three years."
This condition should be a concretization of the original "no other major violations" to make it more feasible.
The reform of the registration system has a legal basis only when the conditions for public issuance have been revised. The registration system does not mean that the issuance materials will not be reviewed, but the focus of the review has changed, from reviewing whether the issuer has "sustainable profitability" and therefore whether it has investment value, to the completeness of information disclosure documents Conduct an audit, “judge whether the issuer meets the issuance conditions and information disclosure requirements, and urge the issuer to improve the content of information disclosure” (Article 21, paragraph 2). This means that the nature of the exercise of administrative power has changed, and the relationship between the government and enterprises has undergone major changes, which has strengthened the trend of marketization of the securities regulatory system.
From the point of view of the pilot of the sci-tech innovation board registration system, although there are still unsatisfactory aspects in terms of review and inquiries, relatively speaking, the registered issue The predictability is greatly enhanced and the uncertainty is reduced.
Of course, at present, it is unrealistic to promote the registration system from the science and technology innovation board to all stock exchanges. The full implementation of the registration system is in reality. It must be done step by step according to market conditions and needs. Therefore, the revised "Securities Law" also stipulates: "
The specific scope and implementation steps of the securities issuance registration system shall be stipulated by the State Council
3. Improve the level of investor protection
The revised "Securities Law" created a new "Investor Protection" chapter, which greatly improved the level of investor protection, which stipulated the investor suitability system and securities Representative litigation system.
The first paragraph of Article 88 provides "
When a securities company sells securities or provides services to investors, it shall, in accordance with regulations, fully understand the investors’ basic information, property status, financial asset status, investment knowledge and experience, professional capabilities and other relevant information; truthfully explain the important content of securities and services, Fully reveal investment risks; sell and provide securities and services that match the above-mentioned conditions of investors
", the third paragraph stipulates, "
If a securities company violates the first paragraph and causes losses to investors, it shall bear the corresponding compensation liability.
"This is the first time that Chinese law clearly stipulates the investor suitability system, which has enhanced the level of investor protection. However, the implementation of this article needs further refinement, pending the specific rules of the Securities Regulatory Commission and the judicial interpretation of the Supreme Court in the future. Be implemented.
Article 95 stipulates: "
When investors initiate securities civil compensation litigation such as false statements, if the subject matter of the litigation is of the same type, and one party has a large number of parties, a representative may be selected for litigation according to law.
For the litigation filed in accordance with the preceding paragraph, there may be many other investors with the same litigation request, the people’s court may issue an announcement stating the litigation For the requested case, the investor shall be notified to register with the people’s court within a certain period of time. Judgments and rulings made by the people's court shall be effective for investors participating in the registration.
The investor protection agency is entrusted by more than 50 investors, can participate in litigation as a representative, and is the right holder confirmed by the securities registration and settlement agency Register with the people’s court in accordance with the provisions of the preceding paragraph, unless the investor clearly expresses his unwillingness to participate in the litigation.
Article 95 stipulates that this law is the most "radical The difficulty of false statement securities civil compensation litigation lies in the large number of injured investors and the small amount of individual damages. Therefore, a convenient litigation method is needed to organize all injured investors to participate in the litigation. In practice, the Supreme Court In 2003, the judicial interpretation of misrepresentation securities compensation litigation was released. Although the presumption of causality was adopted to solve the substantive law problem, it did not solve the problem of the method of litigation. The judicial explanation clarified that such litigation can only be carried out in single or joint litigation. , An indeterminate number of representative lawsuits cannot be used. The provisions of Article 95 this time clarify that an indeterminate number of representative lawsuits can be used in securities civil compensation litigation, and the court will issue an announcement to solicit the registration of injured investors. This kind of litigation method is actually in place. Article 54 of China’s Civil Procedure Law has long been stipulated.
The most important thing is the provision of Article 95, paragraph 3. Under this article, investors The protection agency can be entrusted by 50 investors to participate in the litigation as a representative. More importantly, in the case of court announcement registration, it can directly register in the court for the right holder confirmed by the securities registration and settlement agency, unless the investor It is clearly stated that it is not willing to participate in the lawsuit. This is the Chinese version of the so-called "implicit participation and explicit withdrawal" of the US class action. Therefore, the US class action will have a huge effect of curbing illegal activities because it is implied to join and express withdrawal. Under the institutional arrangement, it is not necessary for many injured investors to take the initiative to join the litigation, but the "representative plaintiffs" will replace them to seek compensation from the illegal company. Of course, the US securities class action also has various drawbacks, such as lawyers leading to excessive litigation and premature settlement As a result, investors are unable to obtain sufficient compensation, etc. However, the "Chinese version of the securities class action" designed in the third paragraph of Article 95 is extremely sophisticated: First, the litigation method designed in this article does not break through the provisions of the Chinese Civil Procedure Law, and It just borrows the body of an uncertain number of representative litigation; secondly, the investor protection agency replaces the lawyer to lead the litigation, which greatly reduces the possibility of excessive litigation and premature settlement. Of course, there are some restrictions in doing so, including The activation of this mechanism depends on the announcement of the court and the possible problems with the incentive mechanism of the investor protection agency. This requires further improvement of relevant rules in the implementation of this clause in the future.
4. Increase penalties for illegal acts
"Securities Law "Another major change in the revision of the "Securities Law" is to increase the penalties for illegal acts. From the "Legal Liability" chapter of the revised "Securities Law", you can see the revised "Securities Law 》The level of penalties for violations of the law has been greatly increased, the amount of fines has been greatly increased, and the multiple of penalties has basically increased from 1-5 times to 1-10 times.
The main function of punishment is to deter. Without effective punitive measures, it will be difficult to deter future violations. The "Securities Law" has significantly increased the penalties for illegal activities, which is obviously necessary, especially considering that after the full implementation of the registration system, the securities market will adopt a policy of "lenient entry and strict control". There are no effective penalties. Obviously It is difficult to achieve the policy goal of strict management.
However, it is difficult to have an objective standard for what kind of punishment is appropriate. "The troubled times should use heavy codes." The problem is that "severity" is a relative concept, and it is difficult to judge it alone. It can only be a process of trial and error and adjustment. The investigation of legal liability for securities violations is not the task of the Securities Regulatory Commission alone. Administrative punishment is only one of the means to investigate liability for violations. Criminal and civil liabilities are actually more important. This amendment to the third paragraph of Article 95 has added the "Chinese version of the securities class action" system. If it can be implemented smoothly, it will make the investigation of civil liability more feasible. Securities criminal liability has long been stipulated in the "Criminal Law". Numerous securities frauds, false statements, insider trading, and market manipulation may all constitute criminal offenses. However, in reality, despite the frequent occurrence of such securities frauds, there are few cases where criminal liability is pursued. Where is the problem? I am afraid that it cannot be solved by the revision of the law. The key lies in implementation.
What can not be implemented, there is a clause that civil compensation takes precedence. "If you violate the provisions of this law, you should bear civil compensation liabilities and pay fines, penalties, and illegal gains. If the property of the offender is not enough to pay, it shall be used first to bear civil compensation liabilities" (Revised Article 220), which is the "Securities The law has always been stipulated. However, in practice, administrative penalties often occur first, and fines are directly turned over to the state treasury within 15 days after the penalties are issued. How to achieve priority in civil compensation? So far, there is no precedent and no specific and operational procedures. It is expected that the Ministry of Finance, which controls the treasury, can implement the relevant provisions of the Securities Law.
3. Insufficiency of the amendment to the Securities Law
1. The original intention of the "Securities Law"
How to judge the success and failure of this revision of the "Securities Law"? Obviously, it is necessary to return to the legislative purpose of the "Securities Law", "do not forget the original intention, so as to continue."
It is generally believed that,
"Securities Law" The purpose of the legislation is to maintain a balance between "facilitating corporate financing" and "protecting investors"
. The "Securities Law" regulates the direct financing of enterprises. According to Mr. Xiao Gang, “issuing shares to raise capital is a natural right of enterprises”, and the state should intervene only when it involves public interest. However, there is a huge information asymmetry in the direct financing of enterprises to the society. Without the support of legal supervision, it is difficult to develop in a healthy and orderly manner. In Chinese practice, a large number of illegal fund-raising activities, even if no one is supervised, will often break the chain of funds after a few years, which illustrates the fragility of this spontaneous order. The "Securities Law" attempts to reduce the information asymmetry between financiers and investors through supervision and to ensure the standard and orderly conduct of corporate direct financing. This kind of supervision method is mainly embodied in the concept of "protecting investors", which is specifically implemented as institutional arrangements such as registration system, mandatory information disclosure, supervision of intermediary agencies, and legal liability for anti-fraud.
Facilitating corporate financing and protecting investors are two complementary legislative goals. Without the institutional arrangements for investor protection, financing companies cannot To gain the trust of investors, financing costs will become high or even impossible. The capital market in many countries is underdeveloped because of insufficient protection of small and medium investors, making it impossible for companies to use the capital market to obtain funds. However, if excessive emphasis is placed on investor protection, companies will also fear strict legal responsibilities and excessively increase their direct financing costs, and companies will withdraw from the direct financing market and seek other financing channels. Without direct corporate financing activities, investors will lose investment opportunities to participate in corporate development, and investor protection will be impossible.
The Securities Law of any country attempts to strike a balance between these two goals. There is no best system, only the institutional arrangements that best suit the national conditions. Therefore, securities legislationIt has always pursued the dual goals of "both necessary" and "required"-both to promote corporate financing and to protect investors. Judging the amendment of the Securities Law from this "initial intention", we are unavoidably "dissatisfied": (1) From the perspective of investor protection, the definition of securities is not expanded enough; (2) From the perspective of facilitating corporate financing , The securities issuance system lacks adequate exemption arrangements.
2, the definition of securities is not big enough
Although this amendment to the Securities Law has appropriately expanded the definition of securities, it is far from enough. This is because people have misunderstood the function of the Securities Law. Expanding the definition of securities is not to legalize all illegal fund-raising activities, but to include them in the scope of supervision of the Securities Law.
Financing is a natural right of an enterprise. It is not because the Securities Law does not provide that certain financing arrangements will not appear and be implemented . On the contrary, securities supervision must be authorized by law. Without authorization, the scope of securities supervision will not be extended to these financing arrangements that are not specified in the Securities Law, making it out of the scope of securities supervision. Related investors cannot be protected by the "Securities Law", and can only seek the protection of contract law and tort law, and the level of protection provided by the "Securities Law" is obviously higher than these civil laws-otherwise, there is no need for special formulation "Securities Law."
Therefore, from the perspective of investor protection, the scope of the Securities Law should be expanded as much as possible, and all direct financing activities should be included in the regulatory vision of the Securities Law , To provide all investors with the protection of the Securities Law. The definition of securities should adopt a general and qualitative approach, supplemented by enumeration and exemption arrangements.
At the same time, another widespread misunderstanding needs to be clearly clarified: not all securities specified in the Securities Law must be supervised by the Securities Regulatory Commission. Expanding the definition of securities does not mean expanding the power of the Securities Regulatory Commission. In fact, financial products that meet the definition of securities can be exempted from securities supervision through the "existence of other financial supervision" conditions, or they can only require unified supervision standards under the separate supervision model.
3. Lack of issuance exemption system
Under the institutional arrangements of the Securities Law to protect investors, the cost of direct financing for companies is relatively high because they must comply with various requirements for mandatory information disclosure. Even if it is changed to a registration system, it will not reduce the cost of information disclosure and qualification. However, in some cases, such as non-public issuances for qualified investors and issuances with small financing lines, the demand for investor protection is not very high, and the issuer needs to be exempted from complying with the relevant issuance registration procedures, and relatively simplified, Lower cost issuance arrangements. These are some of the issuance exemption systems in the Securities Law, including exemptions for private placements, exemptions for small-value offerings, exemptions for online equity crowdfunding, exemptions for employee stock ownership plans, etc. This can reduce the cost of direct financing for enterprises.
However, in China’s "Securities Law", there is currently only one exemption system for non-public offerings, and there is no exemption for small offerings Wait for some flexible exemption system arrangements. The "Securities Law" amended the requirement that the number of people who have joined the employee stock ownership plan is not included in the 200 shareholders, which is equivalent to the registration exemption arrangement for the employee stock ownership plan. However, the small issuance exemption and online equity crowdfunding exemption that existed in the first and third review drafts were cancelled in the final revision, which inevitably disappointed the industry. In particular, online equity crowdfunding. With the trend that countries have amended the Securities Law to exempt, China has finally abandoned it in this amendment to the Securities Law. Perhaps it is because of Internet finance in recent years, especially P2P. Tragic experience, but also gave up the possibility of experimenting with technology to improve the financing model.
Four. Future prospects
In general, the focus of this revision of the Securities Law is to comprehensively promote the registration system and improve the level of investor protection. It is expected that the market mechanism of “lenient entry and strict control” will be realized.The registration system reform will also improve the exercise of the capital market securities regulatory power, which is conducive to the realization of a market-oriented capital market ecological mechanism.
However, whether the goal of the amendment to the Securities Law can be achieved ultimately depends on law enforcement and justice, and on whether the relevant system can Be implemented. Regarding the securities representative litigation system, the Civil Procedure Law has long stipulated a representative litigation system with an uncertain number of persons, but the people’s courts have been reluctant to adopt such litigation methods. Article 54 cases where an indeterminate number of representative lawsuits are filed are extremely rare. Article 95 of the "Securities Law" clearly stipulates that securities litigation can adopt a representative litigation method similar to Article 54 of the "Civil Procedure Law", and even further stipulates the Chinese version of the securities class action system. It seems inspiring, but in the end Whether it can be implemented depends on the determination and actions of the people's courts to abide by the law.
In addition, this amendment to the Securities Law has greatly increased the punishment for illegal activities, and the administrative penalty has been revised to 1-10 times the illegal income. At present, the penalties imposed by the Securities Regulatory Commission in practice are generally at the level of "no one fines three". Will it be substantially increased to the "no one fines five" standard after March next year? Or do we have to wait for the violation to occur after March 1, 2020 before the penalties can be applied? It is worthy of further study.
In other words, the law has been amended, but the text will not be directly effective. The effect of the amendment depends on the implementation of the relevant agency.
This amendment to the Securities Law is only a staged amendment. Obviously, it is impossible to be perfect, and there must be some unsatisfactory things. The capital market is the most active sector in the economic system. The market is always ever-changing. "Once the law is passed, it will be outdated." Over the past 20 years, the "Securities Law" has been revised five times, which seems to be quite a lot, but it is far from enough. What can be compared is the Securities Exchange Law in Taiwan, which was passed in 1968 and has been revised 26 times as of August 2019, of which 22 were revised after 2000, almost every year, even several times a year in some years. (2010, 2015 and 2018 are all revised three times a year). Why is it so frequent? It is to reflect and respond to market changes in a timely manner through amendments to the law.
Therefore, the amendment of the Securities Law is not a complete effort, but always on the road. We must realize that the passage of this amendment did not end the research work of the Securities Law, but started a new course of continuing to examine the Securities Law.
(The author Peng Bing is a professor at Peking University Law School. The original title of this article is: "Profits and Losses" of the amendment to the Securities Law. This article was originally published on WeChat Public No. "Peking University Financial Law Research Center", The Paper is forwarded with authorization.)
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