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Expediting Financial Legislation and Improving the Legal Environment for Securities Companies

Development of investment banks in the mature international market has been predicated upon the development and expansion of their business. Every cycle of separated operation, or mixed operation, and every reform in the organizational structure of investment banks would not have been possible without relevant legislation and regulatory systems. In the transition period after China's accession into the WTO, it is of great significance for China to expedite financial legislation, improve the legal environment for securities companies, safeguard its financial sovereignty, and strengthen the competitiveness of its financial industry.

In view of the development history of the organizational structures in the mature international market, from a legislative perspective, emphasis should be placed on the improvement of the regulatory system and corporate governance requirements based on the current Company Law and Securities Laws. Statutory provisions in mature international markets such as the United States, Japan, and the United Kingdom can be consulted during legislative processes. And based on the actual development needs of Chinese domestic securities companies, a sound legal environment can be created for the development of securities companies.

Optimizing Governance Structures and Improving Operation Efficiency of Securities Companies

Financial holding companies emerged on the back of a corporate governance structure with the modern property right system at its core. As previously discussed, a company limited by shares should be the prevailing organizational form for Chinese securities companies in the future. Therefore, it's all the more important to have the right person to implement a proper governance structure. In order for Chinese securities companies to optimize their governance structures and improve their operation efficiency, they should take efforts toward the following goals:

- Reduce equity concentration level and increase equity liquidity. This can reduce insider trade and connected trade to a greater extent, and also improve the capital strength of securities companies and reduce their operational risks.

- Raise the proportion of outside directors in the board of directors and strengthen the construction of the director system. The ability of the board of directors to make operational decisions should be improved to ensure the decisions are sensible and scientific.

- Enhance the communication mechanism between the board of directors and management.

- Establish a necessary "Chinese wall" system between various functional divisions.

 
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