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Cover for Comparative Analysis of Hybrid Enforcement of Securities Fraud in China
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dc.date.accessioned2020-09-21T15:17:23Z
dc.date.available2020-09-21T15:17:23Z
dc.date.created2017
dc.date.issued
dc.identifier.uri
dc.description.abstractChina has embarked on major economic liberalization reform with the ascension of former President Deng Xiaoping since the late 1970s, which reestablished its national securities markets during the early 1990s. Today, China stands as the second largest economy and securities market in the world. But it is also recognized as one of the most opportunistic securities markets troubled by rampant securities fraud due to its inefficient socialist economic system and skewed corporate governance. These securities fraud cases generally result in the loss of millions of yuan, which may stymie economic growth, or even affect political stability, particularly for those involving a large number of aggrieved shareholders. However, due to China’s particular state-centered ownership scheme, the government, by default, tends to seek alliances with the judicial system, in which the courts reject to hear large-scale securities fraud cases initially, which then allows the executive branch to retain enforcement actions within its own discriminatory purview. As a result, the securities regulators is set up to fail in its ability to maintain accountable enforcement policies, and neither is private enforcement able to check and balance arbitrary agency discretion in China. Although prominent theories of securities law treat coordinated public-private securities enforcement of securities fraud as a necessary factor to develop securities markets, thereby fostering national economic growth, this dissertation asserts that a country’s securities enforcement system is shaped by a nation’s specific corporate ownership structure and legal culture. Thus, path-dependent limitations restrict not only China, but also other regimes, such as the U.S., from seeking optimal hybrid securities enforcement models. In sum, establishing hybrid enforcement models in compliance with market nuisances is much easier said than done. However, this dissertation provides solutions to coordinate public and private enforcers and harmonize their relationships through a series of innovative hybrid models. By virtue of a comparative analysis between the U.S. and China, this dissertation divides securities enforcement reform proposals along a spectrum according to their ability to exclude other enforcers, ranging from the strongest to the weakest, which are as follows: (1) The Predomination approach, which concentrates enforcement power to either public agencies or private litigants; (2) The Supervision approach, which allows the coexistence of public and private enforcers but grants one sector a certain degree of intervention over the other; and (3) The Compensation approach, where private enforcement may fail to compensate victims, resulting in the public agency to supplement, but not replace, this compensatory function. More importantly, this dissertation further posits that this divide along its strength of exclusivity aiming to centralize all power to one enforcer is least conducive because it fails to take comparative advantage of various different enforcers necessary within this rapidly changing market. Thus, policymakers should remain flexible in their response, thus not treating these approaches as fixed, but constantly in flux across sectors, which can best serve specific market conditions. Based upon this assumption, this dissertation debunks China’s false belief that the 2015 amendments to the Chinese Securities Law are a significant stride towards hybrid enforcement regime due to its intent to consolidate a quasi-public nonprofit organization (the Chinese NPO) as a de facto monopolistic enforcer on behalf of the government. Therefore, this dissertation resolves that the transfer of this Chinese NPO from an exclusive enforcer role to that of an intermediary connecting public and private sectors will benefit the flexibility necessary amongst this dynamic marketplace. In contrast with the proposed Predomination approach, where China intends to concentrate all private enforcement actions to a quasi-public counsel, the Chinese NPO, I suggest that the Chinese NPO should not take all burden on itself, but outsource the cases involving controversial industry principles to private enforcers who are willing to invest resources in pursuing innovative theories of wrongdoings. With reference to the present Supervision approach, China may retain excessive supervisory power over private actions through the Chinese NPO, thus, I propose the Chinese NPO to serve as a two-way supervisory role between the public and private enforcer, in which it can receive and review tips from private citizens to absorb any agency’s slack, or supervise private actions on behalf of the government. Finally, in terms of the present and further proposed Compensation approach, China aims to intervene within the compensation regime via a veil of “private” settlement. I argue that the Chinese NPO can serve as a vehicle for the government to provide civil relief for aggrieved shareholders through either distributing penalties and disgorgements via public enforcement to defrauded investors or insuring investor losses stemming from securities fraud via a risk-rating mechanism.en_US
dc.format1 PDFen_US
dc.language.isoen_USen_US
dc.titleComparative Analysis of Hybrid Enforcement of Securities Fraud in Chinaen_US
dc.typeDissertationen_US


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