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At the recent "Symposium on Financial Development and Legal System Under Financial Crisis", President Zhang Yujun of the Shanghai Stock Exchange (SSE) stated that the SSE would bring all its functions and advantages into play to drive the legal system construction of the capital market and contribute to the capital market development and the building of Shanghai into an international financial center.
The Construction of the Blue-chip Market Sees Remarkable Achievements
Zhang said that the reinforcing and improving of the legal system construction had always been the guarantee for the steady and healthy development of the SSE market. Although the SSE market experienced its ups and downs in the last few years, the trend towards steady development on the market remained unchanged. Through several years' efforts, the scale, quality, role and influence of the SSE market were all improved, with the construction of the blue-chip market achieving outstanding results.
In terms of the international rankings, the statistics from January to May 2009 showed that the stock market capitalization, turnover and amount of financing on the Shanghai securities market ranked second, first and second in Asia and sixth, third and eighth worldwide. Thus, the Shanghai securities market has grown into one of the major capital markets worldwide and in Asia-Pacific region, exerting increasingly influence on the global capital markets and playing a more and more important role in China's national economy.
From the perspective of the blue-chip market construction, the ultra large enterprises leading in various industries of the national economy including China Petroleum & Chemical Corporation, Baoshan Iron & Steel Co., Ltd., Industrial and Commercial Bank of China Limited and Daqin Railway Co., Ltd. have been listed on the SSE successively. Among them, 144 listed companies' total market capitalization is between RMB10 billion and RMB100 billion, 24 companies between RMB100 billion and RMB1000 billion and 2 companies over RMB1 trillion.
Zhang pointed out that there were many reasons for the above-mentioned development and achievements, with the enhancement and perfection of the legal system for the market operation of the stock exchange no doubt one of the crucial factors. Therefore, under the current economic circumstance, it is vital to further perfect the environment for the legal system of the capital market, which needs effective cooperation and interaction among all parties involved in legislation, law enforcement, justice and market.
Focusing on Judicial Intervention and Guarantee from Four Aspects
Speaking of the problems recently rising from the innovative development of the capital market, Zhang held that the resolution of these problems required the further exercise of the function of judicial guarantee and the establishment of the scientific and reasonable judicial policies. Specifically, four aspects of judicial intervention and guarantee deserved our attention.
Firstly, the judicial intervention in the investor protection. Zhang suggested, on the basis of summarizing the experience in judicial practices and trials, perfecting the judicial interpretation of the civil dispute over the false securities statements and cancelling the pre-procedure for administrative punishments when the time is ripe; studying and formulating quickly the judicial interpretation of the civil compensation for the securities frauds including insider dealing and market manipulation; boosting the trial mechanism specialized in dispute over securities issues and setting up special financial courts in areas advanced in securities and financial business in China; perfecting the securities dispute arbitration system to timely deal with the civil securities cases involving investors.
Secondly, the judicial intervention in the corporate governance. Zhang noted that in the market practices, most of the violations, which harmed the investors' rights and interests and jeopardized the market development, occurred in the field of corporate governance. The standardization of the corporate governance and the effective regulation on the activities of the companies' controlling shareholders, actual controllers and managements rely on the strong judicial power and guarantee function. Therefore, we should perfect and formulate the judicial interpretation of the protection of the shareholders' rights and specify the rules of entities and processes for the litigation over the shareholders' rights and by shareholder representatives as soon as possible; intensively look into the civil and criminal responsibilities of the major shareholders, actual controllers and managements for their violations, which emptied the listed companies' assets and damaged the investors' rights and interests, and increase the law-breaking costs of the parties concerned.
Thirdly, the judicial intervention in the market innovation. Zhang said that the transformation and maturation of China's capital market couldn't do without innovation in financial system, products, mechanism and supervision. In the process of innovation, limited by the particularity of the market environment, the complexity of the capital market and the multi-natures of the interests of the securities bodies, it is not uncommon that all kinds of disputes over interests occurred. During the trial of these cases, the courts should not only adhere to the principle of ruling by law to reach the verdicts according to law, but also handle it properly from the perspective of supporting and encouraging the innovation; should not only find out the truth, refer to the law and settle the disputes in light of the common way of thinking, but also exercise the right of judicial discretion by sticking to the essence and fundamental principles of the laws to work out the "rules of the market game" matching the rules and characteristics of the financial market, thus guiding and driving the development of the market.
Fourthly, the judicial intervention in the self-regulation of the stock exchange. Zhang deemed that the stock exchange should accept the judicial supervision, regulation and guidance when fulfilling its self-regulatory duties and exercising its self-regulatory rights. However, the judicial intervention should be carried out under the principle of being reasonable and moderate. The future judicial policies can be constructed from the following four aspects.
Firstly, after taking the characteristics and rules of the stock exchange's self-regulation into full consideration and in conformity with the concept of respecting the market rules, in the process of hearing the cases, the effectiveness of the business rules of the stock exchange should be continuously recognized according to law, and the relations between the general civil laws and regulations and the business rules of the stock exchange, a special commercial rule, should be properly treated.
Secondly, the degree of the judicial intervention should be adjusted in time according to the standardized and legalized levels of the self-regulation of the stock exchange. On the basis that the stock exchange's self-regulation is conducted in conformity with the due processes and the stock exchange sets up the internal channel for rights remedy according to the principle of ruling by law, the "principle of exhaustion of internal remedy" should be introduced and first adopted in the stock exchange and within the securities industry to settle relevant disputes and established as a dispute resolution mechanism.
Thirdly, the judicial review on the stock exchange's self-regulation should be within a reasonable scope.
Fourthly, the interests involved in the self-regulation of the stock exchange should be balanced properly.
