What is insider control?

Classification: Business/Financial Management >> Enterprise Management

Problem description:

Questions about accounting

Analysis:

First, interpret the phenomenon of "insider control"

The so-called "insider control" phenomenon means that managers who are independent of shareholders or investors (outsiders) have mastered the actual control power of the enterprise, fully embody their own interests in the company's strategic decision-making, and even all internal parties join hands to seek their own interests, thus exceeding the control and supervision of the owners and infringing on their rights and interests.

The risk of "insider control" was put forward by Aoki Masahiko of Stanford University in the United States in view of the unique situation of socialist countries in the Soviet Union and Eastern Europe. It refers to the phenomenon that managers and workers of former state-owned enterprises gain a considerable part of control rights in the process of corporatization.

In trust deed, securities investment funds set many obligations for fund managers. However, the essence of the principal-agent relationship between fund holders and fund managers determines the separation of ownership and management rights in the rights of fund assets, and then there is the risk of "insider control".

The so-called "insider control" risk of securities investment funds means that the fund holder, as the principal, aims to maximize the investment income of the fund assets, while the fund manager, as the agent, aims to maximize the personal income, and their goals are not consistent.

Due to the inherent defects of contractual securities investment funds, that is, the fund holders are highly dispersed. Fund investors have no say in the important investment decisions of the fund and cannot effectively supervise and control the fund managers. Therefore, the fund manager (that is, the insider) actually holds the control right of the fund assets, thus fully pursuing his own interests in the fund investment decision-making and infringing on the interests of the fund holders.

Second, the factors analysis and countermeasures of the phenomenon of "insider control" in securities investment funds.

The professional quality of fund managers, especially professional ethics, has a great influence on the interests of investors. Therefore, we must introduce a competitive mechanism into fund managers to give investors more choices. Next, by analyzing the influencing factors of insider control of securities investment funds, this paper discusses the countermeasures.

1. The separation of ownership and management rights of fund assets is the internal factor that causes the risk of "insider control".

The modern company system has two characteristics, one is the corporate property system, and the other is the corporate governance structure. For securities investment funds, it is impossible to manage them directly because of the large number of investors, but only through a corporate governance structure, that is, fund holders hand over their assets to fund managers for management and use, and then hand them over to fund custodians for custody. In other words, the ownership and management rights of securities investment funds are separated in organizational form, that is, securities investment funds contain the internal conditions for the emergence of "insider control". Moreover, in China, most fund sponsors are also sponsors and shareholders of fund management companies. Because according to the current operating mechanism of China's securities investment funds, fund managers are selected by fund sponsors. In this way, the sponsors of major funds subscribe for funds with a relatively small amount of sponsors (the sponsors hold about 60 million shares of securities investment funds as holders), and can stably obtain huge fund management fees (about 50 million) every year.

Obviously, there is a lack of competition mechanism in the choice of fund management companies. At this stage, investors are faced with not only the risk of managers' management level, but also the risk of managers' professional ethics all the time. Because fund management companies are basically established by large securities companies or trust and investment companies, there are various interests between fund management companies and their controlling shareholders in personnel and related transactions. Therefore, fund managers are likely to use fund assets to serve their controlling shareholders, and the ultimate victims are the majority of fund holders. From the above analysis, it can be seen that not only the separation of fund assets ownership and management rights leads to "insider control" internally, but also the operating mechanism of China's securities investment funds provides convenience for the operation of "insider control" externally. How to prevent the operation of this bad system, we discuss from the following aspects.

(1) Adjust the separation of ownership and management rights. Due to the extreme dispersion of investors, if investors have the right to operate, the cost may not be worth the loss. We try to discuss it from the perspective of fund management companies. A, let the fund company have partial ownership: the fund management company should also invest in the fund at the same time, and account for a certain proportion; B. Elect representatives of fund holders (excluding promoters) to station in the fund company to supervise the operation of fund managers as an independent regulatory department. And write the corresponding rules and regulations into the capital trust deed.

(2) Reduce the internal connection between fund sponsors and fund management companies, and avoid the possible joint operation of funds and brokers.

(3) relax the criteria for the establishment of fund management companies and introduce competition into management companies. The establishment of a management company first needs the credit information of the fund management company and its sponsors. According to the Interim Measures, the establishment of a fund management company shall meet seven conditions, among which it is stipulated that "the paid-in capital of the fund management company shall not be less than 65.438+million yuan, and the paid-in capital of each promoter shall not be less than 300 million yuan". Compared with mature foreign management companies, the domestic credit requirements for fund management companies are more stringent, which is of great practical significance to ensure the internal quality of China fund management companies that have just started. But in the long run, this strict supervision will also make many companies, even some securities companies and trust and investment companies with good credit standing and outstanding performance lose opportunities, which is not conducive to fair competition, the healthy development of fund management companies and the long-term development of China's fund industry. Here, the author suggests relaxing the criteria for setting up management companies, and absorbing those companies with strong business ability and standardized law-abiding into the emerging financial field of securities investment funds, so as to promote the development and growth of the whole fund industry.

(4) Select fund management companies through market bidding, so that excellent fund management companies can manage more funds.

2. Unbalanced fund operation structure and decentralized fund ownership are important factors of "insider control" risk.

Securities investment fund investment contracts stipulate the rights and obligations of fund holders (investors), fund managers and fund custodians. Both the fund holder and the fund custodian can supervise the fund manager. However, due to the high dispersion of fund investors, investors' supervision over fund managers is only to attend the fund holders' meeting as nonvoting delegates, and investors' supervision over their own asset operation is ex post facto, which is extremely lagging behind and weak. However, there are great limitations for fund custodians to supervise on behalf of fund holders. On the one hand, in order to strengthen the cooperation with the fund manager, the fund custodian may turn a blind eye to the illegal behavior of the fund manager because of the constraints driven by his own interests and taking the rights as a bargaining chip. On the other hand, the supervision system of fund custodian is not perfect. There is no upper-level supervision, just credit transactions. Moreover, domestic supervision does not explain what is the condition of affirmative supervision, what is the condition of implicit supervision, and there is no penalty problem. Constraints and counter-constraints are not established. It can be said that domestic fund custodians rarely strictly follow the rules. The unbalanced fund governance structure can only rely on the professional ethics of managers.

3. The asymmetric distribution of fund information and the lack of fund holders' right to know about the investment operation of fund managers are another source of "insider control" risk.

Due to the characteristics of fund managers' occupation and management company organization, they have more asset management information, while fund holders are extremely scattered and know less information, which objectively forms an asymmetric information distribution. In addition, in the case of "separation of the two powers", there are also obstacles for fund holders to obtain the right to know all the information about the investment operation of fund managers:

One is the supervision cost, that is, the agency cost in the principal-agent relationship.

Second, the security of information announcement. For the safety of fund operation, fund managers will refuse to release information about fund operation to fund holders within a certain period of time.

Third, the information is untrue. When fund managers use fund assets for personal gain, they may provide false information to fund holders in order to avoid the monitoring of fund holders.

So, how can we overcome the congenital defects of this fund? Generally speaking, incentive mechanism and supervision and restraint mechanism can be adopted.

4. Discussion on countermeasures

In the spirit of research, the author discusses the scheme and policy provisions of incentive mechanism and supervision and restraint mechanism here.

First of all, from the perspective of incentive mechanism, it is to let fund managers share the risks caused by asymmetric information distribution, that is, to link the interests of fund managers with fund returns. Unfortunately, however, China's securities investment funds have not done much in establishing the incentive mechanism. The main means is that the fund management company collects the fund management operation fee according to a certain proportion (such as 2.5%) of the net asset value of the fund. However, fund managers and investment experts don't have any interest incentives, no interest sharing, no shares in fund management companies, and no stock options in fund management companies, so it is very likely that investment experts will form alliances and conspire to make profits.

Before designing the incentive mechanism scheme, I think it is necessary to explain the characteristics of China stock market and the allocation of securities investment funds:

(1) Due to the constraints of the stock market size, operating norms and regulatory system, fund managers may manipulate the stock price and the net asset value of the fund to obtain high management fees.

Because the scale of China's stock market, especially the circulating stock market, is still relatively small, and there are still many defects in market supervision, it is entirely possible for large institutional investors such as securities investment funds to manipulate stock prices and fund net assets. Take a 2 billion yuan fund as an example. If it invests 10% of its assets in a stock, it will reach 200 million yuan. In this way, for a stock with a total market value of 2 billion yuan and a circulating share ratio of 30%, the securities investment fund may control one-third of the circulating shares of the stock, and then some well-known illegal operation methods (such as knocking, joint manipulation, making false news, etc.). ) are enough to affect the market price of stocks. If the fund manager manipulates the net asset value of the fund by speculating the controlled stocks, the fund holder will not only pay too much management fees, but also bear the market risks and legal risks brought about by it. The fundamental solution to this situation should not only focus on the fund industry, but the fundamental solution lies in the standardized construction of the entire securities market and the strict and perfect supervision system.

(2) The extraction standard of fund management fees should give full play to the incentive function. At present, the remuneration of managers of most funds is accrued at the annual rate of 2.5% of the fund's net asset value (some funds are accrued at the annual rate of 1.5% plus performance remuneration), which will inevitably affect the fund's income distribution. Fund managers for their own benefit. Will try to delay the distribution of fund income, which may conflict with the interests of fund holders.

(3) *** Give some preferential policies to the fund industry, so that the fund can enjoy excessive monopoly profits. For example, the placement of new shares by the fund is easy to make huge profits for the fund and does not give the fund market space, which is unfavorable to the growth of the fund industry.

Based on the above analysis, we propose the following scheme.

Scheme 1: The remuneration of fund managers is accrued according to a lower percentage of the net asset value of the fund (such as 1.5%), and the performance remuneration is extracted every year according to the market performance of the fund in the same period. The extraction of performance pay can take a progressive proportion. For example, if it exceeds a certain relative percentage of market performance, such as 10%, it will be extracted according to 10% of excess return, 15% of excess return, 20% of excess return and 25% of excess return. Obviously, this aspect can ensure that the fund manager can obtain certain basic income according to the net asset value of the managed fund; On the other hand, fund managers are encouraged to pursue the maximization of fund returns and higher excess profits as much as possible. It can be said that this scheme has been recognized by investors and most fund managers. For example, the 12 fund issued in June of1999 all adopted the fixed management fee of 1.5%, and many former fund managers (such as funds Hansheng, Yi Tong, Pratt & Whitney, Jinghong, Taihe, Jintai, Kaiyuan, Xinghua, Anxin, Yuyang, etc.) also adjusted themselves spontaneously.

This incentive scheme can be said to have its advantages. Because providing remuneration according to performance can promote the fund to increase the investment scale in the secondary market and encourage fund managers to work hard to get more income. However, due to the supervision system and the quality of fund managers, this has increased the shock of the secondary market to a certain extent and caused extremely bad effects.

In order to pursue profits, all kinds of funds have degraded the investment concept promised in IPO, which should really attract the attention of management, strengthen supervision, strengthen the standardization of operation, and strengthen the self-discipline and legal construction of fund industry.

Generally speaking, this plan has aroused possible speculation, because it does not fundamentally give fund managers long-term incentives. If we can improve this aspect, this incentive mechanism will have more development potential.

Option 2, the fund manager's salary adopts option incentive.

Stock option has been widely popular in the market, which can be said to be an extremely effective incentive method. Essentially, it is a selective option, that is, the right to buy company shares at a given price in the future. It effectively combines the interests of managers with the interests of the company, avoids the short-term behavior of managers and solves the incentive problem of managers (agents) well. Because the existing funds are generally closed for 15 years, the existence of the option system is based. Based on the connotation of stock option and the idea of internal long-term incentive and restraint mechanism of stock option, the author puts forward a scheme of applying option incentive to fund manager's salary.

The fund manager draws a fixed rate return every year at the annual rate of 65,438+0% of the net asset value of the fund, and draws a performance return at the rate of 20% if it exceeds the one-year time deposit rate of the bank for the same period by more than 20%. Because the net asset value of the fund contains unrealized profits, in order to avoid fund managers speculating on the net asset value of the fund, fund managers should be given long-term incentives. The specific plan is as follows: When the Fund is issued, the Fund reserves 10% of the fund share for the fund manager's option incentive. Fund managers have an opportunity to exercise their rights once a year. That is, if the fund exceeds 20% of the market performance in the same period, it can obtain 0.83% of the fund size at a lower price between the fund issue price and the fund net asset value. After two years, 50% circulation is allowed, and after three years, all circulation is allowed. If the market performance exceeds 30% in the same period, the fund manager can subscribe for 0.83% of the fund scale at 90% of the fund issue price or the lower of the fund net asset value. If the performance of the fund is lower than the market in the same period, the fund manager can only subscribe at the lower of the issue price of the fund 150% or the net asset value of the fund. Every year, until 12 years. /kloc-you can subscribe for 0.87% in 0/2 years. At this time, the fund manager himself has subscribed for 10% of the fund share, which is encouraged by two aspects: one is the growth of the fund's net asset value, and the other is the fund's efforts to extend the term. Therefore, fund managers will also pursue the maximization of fund income. If the fund passes the renewal request, its option incentive scheme can be analogized according to this idea.

Second, adjust and improve the supervision and restraint mechanism.

As a typical trust and investment tool, fund has obvious principal-agent relationship system. The main bodies of China's securities investment funds are fund investors, fund custodians and fund managers. The Interim Measures regulate and supervise the establishment, raising and trading of funds, fund managers, fund custodians and the investment operation of funds. It can be said that China's securities investment funds have attached great importance to regulation and supervision from the beginning. However, due to the lack of theoretical level and experience accumulation, there are still many places to be improved in the actual operation of China's fund supervision and restraint mechanism. From the analysis of fund operation mechanism, it can be seen that fund holders, fund custodians and fund managers constitute the triangle of principal-agent relationship. They perform their duties, and their rights and obligations are clear, forming a mechanism of power checks and balances, clear responsibilities, division of labor and cooperation, and benefit sharing. Theoretically, this internal balance mechanism is quite scientific, and it is also an important reason for the rapid development of the fund. However, its performance in reality shows that there are still many places to be improved. The author puts forward the following research results on the basis of predecessors' views and his own thinking.

The first is the effectiveness of the fund holder's power. Due to the large scale of funds and the high dispersion of fund holders, they can only express their wishes by buying and selling funds in the secondary market, and cannot directly supervise fund managers, that is, they can only "vote with their feet". Decentralized fund holders want to form effective supervision over fund managers, and the cost is too high. How to solve this contradiction? Drawing lessons from the concept of corporate governance structure, the author suggests introducing the board of supervisors into fund operating institutions. The board of supervisors is elected by the fund holders and usually has full authority to supervise and correct the management behavior of the fund managers on behalf of the fund holders. In case of special circumstances, have the right to apply for a fund holders' meeting for discussion. It is best for the board of supervisors to be elected by professional organizations in the society through public bidding. Its appointment and removal is decided by the fund holders, who are responsible for the majority of fund holders. The remuneration is recommended to be drawn according to a fixed proportion (0.05%) of the fund's net assets. Whether or not to resign requires not only the approval of the fund holder 1/3, but also once a year. It is also audited and supervised by the CSRC.

Secondly, because fund managers often act on behalf of fund ownership, driven by the interests of their own business development, the custodian may relax the supervision power to a certain extent, resulting in a relatively weak restrictive relationship between the two. The fundamental reason for this influence lies in the selection process of fund managers. In China, fund managers are selected by fund sponsors who own 3% of the shares of the fund, but 97% of fund holders who are most concerned about the fund performance have not selected the fund managers in advance. Generally speaking, the fund management companies selected by fund sponsors are wholly-owned companies.

Obviously, fund management companies and fund sponsors have the basis of interest collusion, and this operating mechanism violates scientific principles. It is suggested to try the following methods: the establishment of fund management companies is separated from the establishment of funds. In other words, fund management companies are established by professional institutions with fund management qualifications, and their management talents should be openly recruited for the society, and all of them must pass the qualification certification. When the fund is established, the fund management company shall not participate in the fund initiation, and the fund sponsors shall bid for the fund management company in the market, so as to truly realize healthy competition and make the fund management company as the core of the fund industry truly standardized and mature. Fund custodian banks should be selected by fund sponsors, and their effective supervision of fund management companies can be fully reflected. It can be said that as long as the competition mechanism is introduced into the selection of fund management companies, other problems will be solved or weakened accordingly.

Third, improve the internal management mechanism of fund management companies. At present, the newly established securities investment fund management companies in China have a set of internal management mechanisms in actual operation, but the degree of sound and effective implementation is different. China fund management companies, which are still in the pilot stage, should be stipulated in laws and regulations, and the establishment of internal isolation facilities (firewalls) is one of the conditions for the establishment of fund management companies. At the same time, by improving the qualification registration of fund managers, we can standardize the quality of employees and create a level playing field for fund management companies. In addition, a reasonable regulatory culture and a regulatory audit department should be established within the management company to ensure that the operation of the fund management company meets the regulatory standards.

Finally, improve the national social supervision mechanism and legal system construction. Legal restraint and social supervision are the external restraint environment necessary for the healthy development of an industry and a company. It should not be confined to the fund industry, but should set out from the good operation of the whole national economy, establish a social supervision system involving economic life, legal life and other aspects, and create a good internal and external environment for China's socialist modernization.