Li Shuguang, President Of Graduate School Of China University Of Political Science And Law

Information disclosure has changed from meeting the needs of administrative supervision to meeting the needs of investors for "substantial and effective" information.

From 1990 to 2020, China's capital market has become the second largest capital market in the world in the past 30 years.

The 30 years of vigorous development of capital market is also the 30 years of rapid development of domestic legal system. In 2020, with the implementation of the newly revised Securities Law, the comprehensive implementation of the securities issuance registration system has been formally written into the law.

Professor Li Shuguang, President of Graduate School of China University of political science and law, has a voice in the institutional changes of capital market in the past 30 years. He has been engaged in the study of enterprise bankruptcy, merger and reorganization since the mid-1980s, and is one of the earliest pioneers in this field in China.

After that, Li Shuguang successively participated in drafting a series of important laws and regulations, such as futures law, enterprise bankruptcy law, state-owned assets law, securities investment fund law, partnership enterprise law and so on. Around 2004, Li Shuguang also participated in the revision of the securities law as a member of the amendment group.

What is more worth mentioning is that Li Shuguang is one of the few academic experts who served as a member of the issuance Audit Committee of the CSRC. He was re elected as a member of the main board issuance audit committee from the 13th to 15th sessions, and personally participated in the front-line work of securities issuance audit under the approval system.

Whether he is a pioneer in the legal construction of the capital market, or a participant in the issuance and examination of the approval system, standing at the node of the domestic capital market for 30 years, Li Shuguang has many bright spots to explore. His observation and Thinking on the development of China's capital market can also provide a unique perspective for the market. For this reason, the 21st century economic report "China's capital market 30 years of 30 people" series of interviews specially invited Professor Li Shuguang, President of Graduate School of China University of political science and law, to analyze the past 30 years of capital market from the perspective of law, and look forward to the future development of capital market.

21st century: in March this year, the new securities law has been formally implemented. What progress or outstanding changes have been made in China's capital market before and after the implementation of the new securities law?

Li Shuguang: this revision of the securities law is a major reform, which implements the concept of registration system as the core. Because the registration system and the original approval system are very different, more emphasis on the role of the market itself, more emphasis on the judicial function. The securities law before 2019 is actually a securities law dominated by regulators. After the registration system came out, this concept has undergone fundamental changes, allowing the market itself to reflect its power, including the scope of application, securities issuance, listing and trading, information disclosure, company acquisition, regulatory agencies and legal liability, etc., which have been greatly revised, with 53 new items added and more than 20 deleted. The most important thing is that after the implementation of the registration system, the market-oriented access, trading and withdrawal of companies should be marketized, that is, the whole system and mechanism of securities market operation should emphasize marketization.

This is a concept change from approval system to registration system. In the past, the administrative power was the dominant force, and now the market force is emphasized. The role of justice is more important than in the past. This is a fundamental change and the biggest change in my opinion.

21st century: how should we look at the amendment of investor protection in the new securities law?

Li Shuguang: in my opinion, the most important function of securities law is actually to protect investors. The new securities law strengthens the protection of investors from three aspects.

The first is information disclosure. The new securities law strengthens investor protection by refining information disclosure rules. The original information disclosure regulations in Taiyuan were changed. For example, the scope of information disclosure obligors has been expanded this time, and the original provisions are relatively narrow. In fact, many people in the market know the inside information, and they are not responsible for any illegal activities. This time, the personnel who may obtain insider information in business dealings with the company, the company's purchasers, major asset traders and their senior executives, the staff of the competent departments and regulatory agencies who know the inside information in the acquisition activities of securities issuance and trading are all included. In fact, many key people in related links of listed companies may be insiders of inside information, and their disclosure obligors must be expanded.

Information disclosure has changed from meeting the needs of administrative supervision to meeting the needs of investors for "substantial and effective" information. For example, the requirements for continuous information disclosure and disclosure of major events have been added. The information disclosure was originally too few for directors, supervisors and senior executives. A lot of information was not disclosed in some major decisions of directors, supervisors and senior executives. However, some key information related to investors' investment judgment and value judgment should be disclosed. The directors, supervisors and senior executives are required to confirm the issuance documents and reports in writing, undertake the guarantee obligation for the disclosure of information and promise the liability for compensation. In addition, the new securities law requires the purchasers of listed companies to disclose the source of funds for acquiring and increasing their holdings, especially after the Baowan dispute.

The new securities law has a lot of detailed provisions on information disclosure involving investors' rights and interests, especially emphasizing that information that is important to investors' value judgment and investment judgment needs to be disclosed, which I think is the most critical point.

Second, with regard to investor protection, the CSRC has also established investor protection institutions in the past, but how does it work? There must be a specific mechanism, especially a legal basis. This time, the new securities law has introduced the securities representative litigation system. The investor protection agency, entrusted by more than 50 investors, can act as an agent for litigation, "explicitly withdraw and implicitly join". In the Chinese version of class action, the insurance bureau that investors do not object to can represent it, and the investor protection bureau can directly Sue That's the key. If the subject matter of a civil compensation action is the same, a representative may also be selected for litigation. There is also the establishment of securities companies to investors' proper management obligations and advance compensation system.

Third, the new securities law has increased penalties for fraudulent issuance, false statements, insider trading, and market manipulation. This is what we have been proposing. In the past, the highest penalty for fraudulent issuance was 5% of the fund raised, and now it can be fined twice as much as the raised fund; the original 5% is only a slight rain, and if a hundred million yuan is raised, it will be fined 5 million yuan, which is useless to the fraudsters, but the fine of 200 million yuan is not the same. In addition, the maximum penalty for false statements and insider trading was only 600000 yuan. The original securities law revised in 2005 was too light. Of course, there were inflation factors. Now the penalty can reach 10 million yuan. Compared with the past, the intensity of punishment has been greatly increased, and the cost of violation of law has increased, but I think the amount of punishment is still less. However, it is very good for investor protection to include the civil liability compensation clauses.

Of course, there are many other amendments to the new securities law, including expanding the definition of securities, building a multi-level capital market, improving the acquisition system of listed companies, delisting system, business management system of securities companies, securities registration and settlement system, and cross-border regulatory cooperation system. With the promotion of the registration system, the positioning of the exchange has been greatly reformed, with great changes and great responsibilities. This is a major revision since the implementation of the new securities law.

Class action system is also a way to improve the quality of listed companies

21st century: you also mentioned the problem of increasing the cost of illegal activities. You think that the penalty is still too small, or there will be doubts about "three cups of fine wine". How should this be improved? Is it better to link it with criminal law?

Li Shuguang: it must be linked with the criminal responsibility, that is, the amendment of the securities law should be linked with the amendment of the criminal law.

At present, the legislation of our entire financial market, not only the securities law, but also other commercial banking laws, insurance laws, especially the futures law, has not been linked with the amendment of the criminal law. The capital market legislation emphasizes the concept of efficiency and mainly uses various economic means of punishment and civil compensation mechanism. This method is right, because according to the analysis of cost-effectiveness, it is a very important deterrent, deterrent and pressure mechanism for infringers. However, there must be follow-up of criminal justice means, which can not be done without criminal justice means. The two means should be used in a balanced way.

In the securities market and financial market of the United States, the judiciary can make plea bargaining with the lawbreakers, that is, the offenders can choose between a and B. after breaking the law, they can either go to prison for 20 years or pay 2 billion, and the offenders can choose one of them. Now our law is equivalent to only giving the lawbreaker a choice of paying 2 billion yuan. The lawbreaker says that I can't take it out, or hide the profits, and there is no other way to deal with him. If there is a plea bargaining system, offenders can't afford to pay, at least they can be jailed. Penalty for those who break the law, there is still a certain degree of deterrence and pressure. At the same time, from the perspective of institutional economics, this choice also reduces the transaction cost of the whole society, in fact, promotes the efficiency of supervision. We did not consider this issue from the perspective of institutional economics, that is, only by combining the application of criminal law can we make economic punishment more valuable and easier to implement. Without criminal means, the efficiency of punishment will be problematic. If the penalty is twice the amount of money raised, the violators say that they want no money or life. If there is no criminal means, there will be no deterrent to those who beg for money.

21st century: what do you think of the class action system introduced by the new securities law?

Li Shuguang: class action system is not only a way to protect investors, but also a way to improve the quality of listed companies. For example, in the U.S. securities market, lawyers in some law firms are waiting for the opportunity to represent class action every day. Class action is like a legal shorting mechanism. Once a listed company has fraud and other problems, the person who catches your weakness will sue you and make you pay for it.

This has also contributed to the improvement of investor protection, because there is a deterrent system of class action, which requires companies to pay as long as they break the law. Some listed companies may feel lucky. If something goes wrong before, there is an 80% chance that no one will find you to lose money. Now when the class action system comes out, it's different. A group of lawyers stare at you every day to make mistakes and "earn" your compensation. More than 90% of the violators will not be able to escape the fate of huge losses, which is a great deterrent. However, China's class action system is not the same as that of the United States. It has Chinese characteristics and is more complementary to supervision.

It is necessary to set up stabilization fund

21st century: after the abnormal fluctuation of the stock market in 2015, you proposed to set up a stabilization fund. After the implementation of the new securities law, do you think it is still necessary to set up a stabilization fund?

Li Shuguang: I think it is still necessary in the Chinese market, because the Chinese securities market has its particularity.

First, there are more retail investors in the securities market. Retail investors are ordinary investors who lack professional knowledge. These retail investors' risk tolerance is poor. If there is a stabilization fund, it will help to stabilize the sentiment of retail investors when the stock market is in a violent shock.

Second, China's capital market is relatively immature. It is a semi market-oriented and semi administrative market with poor market recovery ability. Therefore, it is necessary to set up a stabilization fund to prevent possible systemic risks.

Third, many specific mechanisms in China are not mature, including the gap in cross market supervision, and the transmission of risks between futures and securities markets. Therefore, it is necessary to level off the risks, make up for the loopholes in the system and mechanism, and even discover some "grey rhinoceros" in advance.

Stabilization fund has its unique value in China. During the abnormal fluctuation period of the stock market in 2015, the national rescue team used a lot of funds to enter the market to stabilize the market. It is better to establish a stabilization fund with standards, thresholds, procedures and limitations, that is, there are certain rules of the game, so as to better distinguish the rights, obligations, responsibilities and their boundaries.

The stabilization fund can set up certain rescue principles and standards, set the main body of rescue responsibility, and play a role under certain preconditions, rather than across the board. When the stock market disaster occurred in 2015, the national team's rescue fund entered the market, which was equivalent to saving all the good and bad in the market. But the stabilization fund can only save the good and not the bad, and the bankrupt and the delisted should not be concerned. The stabilization fund is conditional, has the premise, has the rule, has the procedure to do.

To perfect the delisting system, we still need to "gnaw hard bone"

21st century: how to improve the delisting system under the registration system in the future?

Li Shuguang: I think this is a systematic problem, and several key things need to be done:

First, let the market appear more benchmark cases of bankruptcy liquidation delisting of listed companies. Bankruptcy liquidation delisting can be called the most rigid company delisting. At present, many companies in the A-share market have problems in reorganization and reorganization. This is flexible delisting, and bankruptcy liquidation is still rare. What our market needs is rigid delisting, not flexible delisting. Flexible delisting and rigid delisting have a big difference in market influence and deterrence.

Second, the delisting of listed companies should be separated from the interests of local governments. This is very difficult, because once a listed company delisted, it means that the regional economy will be affected. Chinese people talk about two cultures: one face and one interior. If a listed company withdraws from the stock market, the local government where it is located will not be able to hang on its "face" and "Li Zi" will also bring a series of difficult consequences, including a series of problems, such as financial support, bank views, business environment, and political performance inspection.

Third, we should deal with the relationship between investors and regulators. After the delisting of listed companies, the investors who participate in them must have emotions. Now, the supervision still allocates resources from various considerations and relationships, rather than completely market-oriented allocation of resources. It is time for regulators to make the listed companies go bankrupt. It is true that there will be some negative effects in the short term, which will bring certain market consequences. However, as long as the regulatory authorities have resisted the pressure of a few investors and forced bankruptcy and delisting, these investors will no longer have illusions about the enterprises with delisting risks, and will be truly responsible for their investment, be responsible for their own profits and losses, and bear their own risks. For those good, high-quality listed companies, this is the survival of the fittest, let the market really play a decisive role in the allocation of resources.

I think these aspects are the things to be done later. They are deep-seated things. They are not the problems that can be solved by refining and perfecting the legal provisions. These are the most difficult "hard bones" to chew.

21st century: at present, the rules of listing on the new third board are already asking for opinions from the market. On the contrary, is it possible for listed companies to delist in the new third board market in the future?

Li Shuguang: in fact, the new third board itself does not have much vitality, so it can not play the role of turning the board. It is better to withdraw from the market directly. I don't think this is the function of a multi-level capital market. The multi-level capital market is to provide multi-channel for financiers. It should have certain rules for its own access, which is called multi-level capital market. Instead of retreating from this market to another market is called multi-level, which is actually damaging the market and is the signal failure of the market.

The multi-level capital market provides various possibilities for enterprise financing, but delisting is the survival of the fittest, which is two different things. If the market can not graft these two signals together, it means that the original three colors of red, yellow and green suddenly turn into three colors of red, white and blue, which confuse the signals and give us an illusion.

The registration system is to protect enterprises by asking more questions and details

21st century: you served as a member of the third board of the China Securities Regulatory Commission and personally participated in the securities issuance audit under the approval system. How did you feel at that time?

Li Shuguang: at that time, the system of the IEC was just reformed, and the list was made public to the public, so the members of the IEC were under greater pressure to do the work. Each member of each enterprise to be examined has to hand over dozens of questions. The enterprise has already passed the preliminary examination and preliminary examination, and has passed several tests to the national development and examination committee. This still needs to come up with dozens of questions. That is to test your level and find problems from millions of words of materials.

We pay more attention to the company's profitability, product situation, historical inheritance, shareholder structure, corporate governance, as well as the investment direction and efficiency of the raised funds, the continuity of the company's operation, and various complicated legal relations of the company, whether there are lawsuits, etc. The IEC pays more attention to these things, with different angles Macro has micro. Today, it seems, too much has been done.

21st century: under the current registration system, the power of examination and approval of new shares has been shifted to the exchange. However, the market still reflects the problem of "asking too much, asking too much" and not jumping out of the thinking of approval system. What do you think of this?

Li Shuguang: in fact, the development and Examination Committee of the CSRC, to some extent, is a quasi government. Although it is a public institution directly under the State Council, it is actually a government department. Therefore, when you review, you are actually endorsing the issuance of Securities for the company. This is a conceptual problem. But the exchange is a market after all, and it is considered from the perspective of the market. The examination and approval of the exchange is responsible for investors, and the concept of endorsement should be omitted.

From the technical point of view, the development and Examination Committee of the CSRC has the value of endorsement, that is, if there are mistakes in the audit, there will be risks after the listing of enterprises, and the performance will change. Not only the IEC but also the CSRC should be responsible for this. Those financial fraud listed companies have problems, investors have to come to the CSRC, you review, you have passed the meeting. How can the CSRC guarantee the listed companies?

Registration system is to get rid of such a dilemma of endorsement. Everything the exchange does is for the purpose of investor protection, so it is no problem to ask more and more details. Ask more questions and ask more details. As long as the company meets its basic requirements, has the ability to continue operation, standardizes itself in all aspects, and has no fraudulent issuance, no false statements and no tainted information, it is OK.

The inquiry of the exchange is to increase the transparency of some information, truthfulness, accuracy, completeness and timeliness. The details of these inquiries are actually useful to investors.

I think it is not a question to ask in detail, but to be responsible for the listed companies. It is different from the concept of government endorsement. In fact, one of the goals of the registration system is to be listed without asking. I personally think that the company can be listed even without consulting. However, there should be one rule: anyone who accuses listed companies of financial fraud, false statements, insider trading, etc., will be punished if they are found to be bankrupt or sentenced to prison. If this can be done, there will be no inquiry link in the issuance of securities. Now every question the exchange asks is to protect listed companies, not to let you pay 1 billion, 10 billion, and not to let you go to prison. The reason is that this is called registration system.

The market under the registration system should be a market with more transparent information and full risk and responsibility. The registration system can ask no questions. The more you ask, the better it will be for the company. It is to protect the company and make it less responsible in the future. Of course, it's also protecting our investors.