A long-expected draft on securities investments, undergoing its
third review at the fifth session of the 10th National People's
Congress, is likely to be passed next Tuesday.
The draft law - started in 1999 and known as the law on
securities investment fund - is the first in China to regulate the
nation's new securities fund industry.
According to NPC sources, the third version of the draft
clarifies the rights of funds holders to bring lawsuits against
funds managers, funds trustees or funds-offering institutions if
infringements occur against the legitimate interests or rights of
the investors.
"The right to bring a suit is very important to protect the
interests of investors, and the draft pays much attention to
clarifying the civil liabilities and rights of funds managers and
companies," said Wang Yiming, a member of the NPC's Law Committee.
"This would plug present loopholes."
Legal experts point out that the current Securities Law
pays scant attention to the civil liabilities of listed companies
that cheat investors, and also fails to stipulate the rights of
shareholders to bring a suits or lodge administrative
complaints.
Wang said the third version of the draft also makes a major
change to the issue of whether open-ended funds can apply for
short-term loans from commercial banks.
Open-ended funds, different from close-ended ones, can be bought
and redeemed by investors based on their developing needs.
The second version of the draft stated that funds management
companies are allowed to apply for short-term loans when many
investors ask to redeem their funds at the same time.
However, some legislators disagree with that and argue that the
current segregated regulatory system of securities, and banking and
insurance industries, prohibit the three from investing in one
another. They say the flow of banking funds may foment risks in the
securities industry.
Since open-ended funds have existed in China for only a short
time, Wang said his committee so far lacks enough experience to
give a final answer on the issue, so the former clause in the
second version was deleted.
"The current draft does not stipulate whether open-ended funds
can apply for short-term loans from commercial banks, which leaves
space for further amendments according to the developing needs of
our situation," said Wang.
Zhou Zhengqing, former chairman of the China
Securities Regulatory Commission and now a member of the NPC
Financial and Economic Committee, said an early enactment of the
law would lay a solid legal basis for the fund industry in China,
which is in an expansion phase and embracing more foreign
participants as the country's financial markets open wider.
(China Daily October 25, 2003)