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The parties to the securities and futures administrative law enforcement promise that this new law enforcement method will soon form a complete legal system. In response to this matter, Mei Shenshi, a lawyer from Beijing JAVY Law Firm and a professor at the School of Civil and Commercial Law of China University of Political Science and Law, was interviewed by the "Rules of Law Daily" and gave a comprehensive and detailed interpretation.

Enforcement" (hereinafter referred to as the "Measures"), which, in the form of administrative regulations, establishes a new type of administrative law enforcement method for securities regulatory authorities to terminate case investigations after the parties have fulfilled their commitments - Administrative Reconciliation.

As a supporting provision of the "Measures", the CSRC issued two regulations on the same day to solicit public opinions, namely, the "Regulations on the Implementation of the System of Commitment of Parties in Securities and Futures Administrative Law Enforcement (Draft for Comment)" (hereinafter referred to as the "Regulations"), and the "Securities and Futures Administrative Law Enforcement Regulations". The Administrative Measures for the Commitment Funds of the Parties to Futures Administrative Law Enforcement (Draft for Comment)" (hereinafter referred to as the "Commitment Fund Measures"), which refines the principle provisions of the "Measures".

01.Commitment System Improves Law Enforcement Efficiency

The party commitment system in administrative law enforcement, from a legal perspective, is an important institutional arrangement in the new securities law.

The relevant clause in the new Securities Law is Article 171, which specifically reads: “During the State Council’s securities regulatory agency’s investigation of an entity or individual suspected of violating securities laws, the party under investigation will apply in writing and promise to be recognized by the State Council’s securities regulatory agency. If the suspected illegal act is corrected within the time limit, the relevant investors are compensated for losses, and the damage or adverse impact is eliminated, the securities regulatory agency of the State Council may decide to suspend the investigation. If the party under investigation fulfills its commitment, the securities regulatory agency of the State Council may decide to terminate the investigation; If the parties to the investigation fail to fulfill their commitments or have other circumstances as prescribed by the State Council, the investigation will be resumed. The specific measures will be prescribed by the State Council.”

Mei Shenshi, a lawyer at Beijing JAVY Law Firm and a professor at the School of Civil and Commercial Law of China University of Political Science and Law, said that from a legal perspective, the "Measures" of the State Council are administrative regulations, and the higher-level law they are based on is the law, namely the Securities Law, while the CSRC's "Measures" are administrative regulations. The "Regulations" and the "Measures for Commitment Funds" are rules and supporting operational systems to further refine the "Measures", better implement the requirements of the Securities Law and ensure the implementation of the "Measures".

Mei Shenshi believes that improving the efficiency of law enforcement is the basic goal pursued by securities law enforcement officers in various countries, and it is one of the fundamental characteristics of administrative law enforcement that is different from traditional law enforcement. Once a major case of violation of laws and regulations in the securities market becomes a major case, not only will the cost of law enforcement be high and the loss difficult to recover, but it will also spread rapidly and lead to systemic risks. However, during the investigation period of the supervisory department, the administrative counterpart takes the initiative to correct the illegal behavior, eliminate the adverse consequences, and is willing to compensate the parties for their losses, the CSRC may consider adopting this new law enforcement method of administrative reconciliation to terminate the investigation, which will undoubtedly greatly save law enforcement. resources are also beneficial to investors.

02.Administrative reconciliation is widely used

Lawyer Mei Shenshi said that in the field of capital market supervision and law enforcement, the administrative reconciliation law enforcement model is widely used. In the US capital market, administrative reconciliation cases have reached 90% of all law enforcement cases.

From the relevant reports of Luckin Coffee, it can be seen that Luckin Coffee finally settled with the US Securities Regulatory Commission, paying US$180 million in exchange for the latter to abandon the accusation of accounting fraud. The authoritative research report of the American Law Society on securities administrative enforcement reconciliation even believes that the effectiveness of enforcement reconciliation directly determines the overall efficiency of SEC enforcement.

03.Refinement and improvement of procedures

Lawyer Mei Shenshi said that the "Measures" clarified the connotation and application principles of the party commitment system in administrative law enforcement, and stipulated the basic procedures for applying party commitment in administrative law enforcement, including application, acceptance, negotiation, determination of the amount of commitment money, signing of the commitment recognition agreement, and performance. Commit to the recognition agreement, suspend investigation and terminate investigation, etc.; Clarifying inadmissible situations in the form of a negative list to prevent system abuse; Clarifying the use and management methods of commitment funds, and the supervision and restriction mechanism. But these regulations are too principled, and the regulations of the CSRC have been refined in many aspects.

On the basis of the negative situations stipulated in the "Measures", the "Regulations" further limit the scope of application from a positive perspective, clarifying that the parties involved in administrative law enforcement are committed to mainly solve: there are greater difficulties in investigation and evidence collection, there are greater difficulties in applying the law, and the ability to improve in order to pay investors' losses in a timely and effective manner, and to achieve regulatory efficiency and other cases. At the same time, the coordination and cooperation between the commitment management department and the commitment calculation department are clearly defined, and the arrangement of the investor compensation mechanism is stipulated.

According to lawyer Mei Shenshi, at the operational level, the most practical thing for the CSRC is to set up an independent administrative law enforcement party commitment review committee, with an office under it,which is responsible for organizing and carrying out the administrative law enforcement party commitment work, and accepting administrative law enforcement party commitment applications and signing commitments recognition agreement, suspension or termination of case investigation and other major matters to make collective decision-making, etc.

The specific steps, the first step is to enter the investigation link according to the "Regulations", and select the circumstances that can be applied to the party's commitment to administrative law enforcement; the second step is to start the initiation procedure. If a party applies for administrative reconciliation, it will submit the application materials to the CSRC in both paper and electronic forms, including basic information such as the application form, a copy of the business license, and contact information, as well as the possible case-filing notice or prior notice of administrative punishment. The third step is to prevent the supervisory department from inaction, clarifying that the investigation department and the trial department of the CSRC should give feedback within 5 working days from the date of receipt of the written materials, indicating whether there is any situation that does not apply to administrative reconciliation and so on; the fourth step, collective decision-making. Clarifying the decision-making procedures and time requirements for the CSRC to decide whether to accept or not to accept, and the circumstances under which the reasons should be explained if the case is not accepted; the fifth step is to clarify the procedural requirements for signing and fulfilling the commitment agreement and the determining factors for the amount of commitment money; the last step, After the parties have fully fulfilled the commitment and recognition agreement, the office will issue a written decision to terminate the investigation to the parties and publish an announcement on the official website of the CSRC.

Of course, the CSRC can terminate the settlement and resume the investigation if it finds that there are new violations of laws and regulations that do not meet the reconciliation procedure.