Viewpoint... The civil liability of the trustee of the management product for breach of the obligation of trust.
Published:
2022-07-22
Origin of 1. problems With the implementation of "strict supervision" and "deleveraging" of the financial market in recent years, the "rigid exchange" of the asset management industry has been gradually broken, and investors have to bear their own investment risks and obtain returns. In this context, when asset management products completely collapse due to the risk of the investment target, or due to other reasons can not be paid, investors began to consider more on the basis of the manager's breach of trust obligations in the investment management stage, to claim civil compensation. The New Regulation on Capital Management, issued in April 2018, puts forward for the first time in a normative document the "duty of good faith, diligence and due diligence" of financial institutions in the capital management business, and makes clear provisions on the fiduciary duty of trustees in the capital management business. However, it is difficult to effectively guide judicial practice because of its relatively principled and low level of effectiveness. Existing judgments show that in practice, most of the capital management contract investors and managers of the legal nature of the obligations of the manager, the basic connotation and extension of the scope is still controversial, and the case-related capital management contract on the obligations of the manager is not complete and accurate, the manager's responsibility boundary is unclear, the standard of conduct disputes frequently. The basic content of the obligation of 2. faith. The obligation of faith is the earliest concept of common law, it arises from the relationship of faith (fiduciary relationship), the obligation of the trustee in the relationship of faith is called the obligation of faith. In short, the fiduciary duty mainly includes two aspects, namely, the duty of loyalty and the duty of careful management. The duty of loyalty is at the heart of the duty of faith and is reflected in the obligation of the trustee to be absolutely faithful to the beneficiary. The connotation of the abstract concept of "loyalty" mainly includes two aspects: on the positive side, the trustee must act in the best interest of the beneficiary (best interest) when dealing with trust affairs; on the negative side, the trustee cannot place himself in a situation where he can foresee a conflict of interest with the beneficiary (conflict of interests). China's Trust Law has made typed provisions on violations of the duty of loyalty, including self-dealing (Article 28), agency of both parties (Article 28), competition (Article 25 introduced), kickbacks (Articles 25 and 26 introduced), embezzlement of trust property or seeking benefits other than the agreement from trust property (Articles 26 and 27) and other related transactions. The duty of prudent management means that the trustee shall perform the duties of a good manager in the management and use of the trust property. If the duty of loyalty is a bottom-line requirement for trustees, the standard of the duty of prudent management is clearly much higher. The characteristics of fiduciary services and the differences in fiduciary capacity make it difficult to unify the criteria for prudential management obligations and can only be considered in the context of specific fiduciary environments, professional backgrounds and experience. In other words, whether the trustee has fulfilled his duty of careful management needs to be judged by the judge in a specific case. In common law, the criteria for determining the duty of care include, inter alia, the business judgment rule (business judgment rule) and the prudent investor rule (a prudent investor rule). The business judgment rule applies to the company's field, which means that the company's directors, executives and counterparties have no interest in the transaction, and make decisions in good faith on the basis of fully mastering possible business information, and have reason to believe that the decision is in the best interests of shareholders. Even if the decision does not bring benefits to shareholders, or even causes certain losses, it can be considered that they have fulfilled their duty of diligence and due diligence. The prudent investor rule, on the other hand, applies to the financial investment sector, which requires the trustee to manage the fiduciary property as a prudent investor would manage his or her own investment affairs. It should be noted that when examining whether the trustee has fulfilled the obligation of due diligence and due diligence, the obligation is a process obligation rather than an obligation of result. Therefore, a breach of the duty of care cannot be reversed as a result of an investment loss. Criteria for determining a breach of fiduciary duty by a trustee of a 3. asset management product First of all, the determination of whether the trustee violates the duty of trust at the contracting stage should mainly depend on whether the trustee conducts due diligence, whether it conducts risk assessment and whether it conducts risk notification. The trustee's prudent management obligation is mainly manifested in prudent investment, and adequate due diligence is the premise of prudent investment; risk assessment and classification are the basis for determining the risk preference and risk tolerance of investors, so as to judge the investment direction matching with the investor; in the case of clear investor needs, the trustee should make full risk disclosure to investors, which is the key to matching products with investors. Secondly, to determine whether the trustee violates the fiduciary duty in the performance process should mainly depend on whether the trustee performs the management duties in accordance with the agreement and whether the information is disclosed. As mentioned above, the legal provisions on the obligations of the trustee are relatively abstract. Therefore, in judicial practice, judging whether the trustee performs the fiduciary obligations should be mainly based on the specific provisions of the relevant asset management contracts and other documents on the management duties of the trustee, and the specific requirements of the industry association established by the asset management products for the trustee to perform his duties; in addition, the trustee should follow the law and contract in the process of handling asset management affairs, provide investors with all information used for investment decisions in a timely manner, and ensure the authenticity, accuracy and completeness of the disclosed information. Finally, to determine whether the trustee violates the fiduciary duty at the exit stage should mainly depend on whether the trustee liquidates and distributes the product in a timely manner when it expires, and whether it actively takes corresponding measures when it is unable to exit normally. Investors purchase managed products for the purpose of receiving income at maturity, so the trustee has the obligation to liquidate and distribute the managed property in a timely manner at maturity. If the trustee fails to fulfill the obligation of timely liquidation and distribution, it shall bear the corresponding responsibility to the investor; in addition, when the asset management product cannot be withdrawn through normal trading, the trustee shall take positive measures based on the principle of maximizing the interests of investors. Relevant Issues in 4. Judicial Practice Whether the (I) trustee is liable for losses on the premise that the asset management product has been liquidated. When the asset management plan has actually been unable to pay, investors require the trustee to be liable for losses on the premise that the asset management product has been liquidated, on which there are major differences in practice. There is a view that for asset management products that have not yet been liquidated, it is considered that the investor's loss has not actually occurred or cannot be determined, and the investor's claim should be rejected. There is also a view that although the asset management product has not been liquidated, the manager has not invested in accordance with the contract, resulting in the entrusted management of the property has no actual value or corresponding protection, the court can presume that the actual loss of the investor has occurred. In view of the above point of view, the author believes that, on the one hand, if the amount of investors' losses cannot be determined, the investor's claim should be rejected in principle. Based on the characteristics of the asset management business, after the maturity of the asset management product, the profit and loss status of the entire asset management property needs to be finalized through the liquidation process. The investor, as the holder of the asset management product, can only determine whether there is a loss and the specific amount of the loss after the product is liquidated. In addition, where the asset management product has not yet been liquidated, it is difficult to determine the causal relationship between the trustee's breach of fiduciary duty and the investor's loss. On the other hand, in order to protect the investor's right to judicial relief, the trustee may be judged to be liable on a pro rata basis if the total amount of the loss is not determined, but the causal relationship between the trustee's actions and the investor's loss is clear. At this time, although the total amount of loss is not easy to determine, but the proportion of investor loss can be determined according to the size of the trustee's fault, in the case can be determined that the trustee of the asset management products after the liquidation of the investor failed to pay the loss in accordance with a certain proportion of the corresponding liability. Otherwise, if at this time to adhere to the incomplete liquidation and investor losses are not fixed referee thinking, will undoubtedly greatly increase the difficulty of investors to recover investment funds, resulting in substantial unfairness. (II) whether investor losses include expected gains In different cases, the investor or based on the contract, or based on tort litigation, the basis of the claim may be different, but the determination of the amount of the investor's loss is an important part of the determination of the investor's breach of contract or tort liability. In the case of a recognized investor who has incurred a loss, the court generally recognizes the principal of the investor's investment as a loss, but there is a different understanding of whether the expected return on the investment agreed upon in the contract is a loss. In my view, in principle, expected returns should not fall into the category of investor losses. First of all, the expected income is not the income that the manager guarantees to obtain, and there are corresponding investment risks for investors to invest in asset management products. Secondly, based on the consideration of preventing "rigid payment", if the investor has no evidence to prove that this part of the expected income actually exists, the expected income should not be recognized as the actual loss of the investor, but only the interest loss of the investor is recognized according to the LPR interest rate of the same period. As Shanghai L Equity Investment Fund Management Co., Ltd., Shanghai T Culture Development Co., Ltd. and other contract disputes with Wang, the judge pointed out that "the expected return does not mean that the manager guarantees that the investor will obtain the corresponding amount of investment income, nor does it mean that the manager guarantees that the principal of the fund will not be lost. Since the plaintiff has not proved the existence of this part of the income, the court does not support it." [Excerpt from (2020) Hu 74 Min Zhong No. 1045]]
Origin of 1. problems
With the implementation of "strict supervision" and "deleveraging" of the financial market in recent years, the "rigid exchange" of the asset management industry has been gradually broken, and investors have to bear their own investment risks and obtain returns. In this context, when asset management products completely collapse due to the risk of the investment target, or due to other reasons can not be paid, investors began to consider more on the basis of the manager's breach of trust obligations in the investment management stage, to claim civil compensation.
The New Regulation on Capital Management, issued in April 2018, puts forward for the first time in a normative document the "duty of good faith, diligence and due diligence" of financial institutions in the capital management business, and makes clear provisions on the fiduciary duty of trustees in the capital management business. However, it is difficult to effectively guide judicial practice because of its relatively principled and low level of effectiveness. Existing judgments show that in practice, most of the capital management contract investors and managers of the legal nature of the obligations of the manager, the basic connotation and extension of the scope is still controversial, and the case-related capital management contract on the obligations of the manager is not complete and accurate, the manager's responsibility boundary is unclear, the standard of conduct disputes frequently.
The basic content of the obligation of 2. faith.
The obligation of faith is the earliest concept of common law, it arises from the relationship of faith (fiduciary relationship), the obligation of the trustee in the relationship of faith is called the obligation of faith. In short, the fiduciary duty mainly includes two aspects, namely, the duty of loyalty and the duty of careful management. The duty of loyalty is at the heart of the duty of faith and is reflected in the obligation of the trustee to be absolutely faithful to the beneficiary. The connotation of the abstract concept of "loyalty" mainly includes two aspects: on the positive side, the trustee must act in the best interest of the beneficiary (best interest) when dealing with trust affairs; on the negative side, the trustee cannot place himself in a situation where he can foresee a conflict of interest with the beneficiary (conflict of interests). China's Trust Law has made typed provisions on violations of the duty of loyalty, including self-dealing (Article 28), agency of both parties (Article 28), competition (Article 25 introduced), kickbacks (Articles 25 and 26 introduced), embezzlement of trust property or seeking benefits other than the agreement from trust property (Articles 26 and 27) and other related transactions.
The duty of prudent management means that the trustee shall perform the duties of a good manager in the management and use of the trust property. If the duty of loyalty is a bottom-line requirement for trustees, the standard of the duty of prudent management is clearly much higher. The characteristics of fiduciary services and the differences in fiduciary capacity make it difficult to unify the criteria for prudential management obligations and can only be considered in the context of specific fiduciary environments, professional backgrounds and experience. In other words, whether the trustee has fulfilled his duty of careful management needs to be judged by the judge in a specific case. In common law, the criteria for determining the duty of care include, inter alia, the business judgment rule (business judgment rule) and the prudent investor rule (a prudent investor rule). The business judgment rule applies to the company's field, which means that the company's directors, executives and counterparties have no interest in the transaction, and make decisions in good faith on the basis of fully mastering possible business information, and have reason to believe that the decision is in the best interests of shareholders. Even if the decision does not bring benefits to shareholders, or even causes certain losses, it can be considered that they have fulfilled their duty of diligence and due diligence. The prudent investor rule, on the other hand, applies to the financial investment sector, which requires the trustee to manage the fiduciary property as a prudent investor would manage his or her own investment affairs. It should be noted that when examining whether the trustee has fulfilled the obligation of due diligence and due diligence, the obligation is a process obligation rather than an obligation of result. Therefore, a breach of the duty of care cannot be reversed as a result of an investment loss.
Criteria for determining a breach of fiduciary duty by a trustee of a 3. asset management product
First of all,The determination of whether the fiduciary has breached its fiduciary duties at the contracting stage should be based primarily on whether the fiduciary has conducted due diligence, whether it has conducted a risk assessment and whether it has conducted a risk notification. The trustee's prudent management obligation is mainly manifested in prudent investment, and adequate due diligence is the premise of prudent investment; risk assessment and classification are the basis for determining the risk preference and risk tolerance of investors, so as to judge the investment direction matching with the investor; in the case of clear investor needs, the trustee should make full risk disclosure to investors, which is the key to matching products with investors.
Secondly,The determination of whether the trustee violates the fiduciary duty in the performance process should mainly depend on whether the trustee performs the management duties in accordance with the agreement and whether the information is disclosed. As mentioned above, the legal provisions on the obligations of the trustee are relatively abstract. Therefore, in judicial practice, judging whether the trustee performs the fiduciary obligations should be mainly based on the specific provisions of the relevant asset management contracts and other documents on the management duties of the trustee, and the specific requirements of the industry association established by the asset management products for the trustee to perform his duties; in addition, the trustee should follow the law and contract in the process of handling asset management affairs, provide investors with all information used for investment decisions in a timely manner, and ensure the authenticity, accuracy and completeness of the disclosed information.
And finally,The determination of whether the trustee violates the fiduciary duty at the exit stage should mainly depend on whether the trustee liquidates and distributes the product in a timely manner when it expires, and whether it actively takes corresponding measures when it is unable to exit normally. Investors purchase managed products for the purpose of receiving income at maturity, so the trustee has the obligation to liquidate and distribute the managed property in a timely manner at maturity. If the trustee fails to fulfill the obligation of timely liquidation and distribution, it shall bear the corresponding responsibility to the investor; in addition, when the asset management product cannot be withdrawn through normal trading, the trustee shall take positive measures based on the principle of maximizing the interests of investors.
Relevant Issues in 4. Judicial Practice
Whether the (I) trustee is liable for losses on the premise that the asset management product has been liquidated.
When the asset management plan has actually been unable to pay, investors require the trustee to be liable for losses on the premise that the asset management product has been liquidated, on which there are major differences in practice. There is a view that for asset management products that have not yet been liquidated, it is considered that the investor's loss has not actually occurred or cannot be determined, and the investor's claim should be rejected. There is also a view that although the asset management product has not been liquidated, the manager has not invested in accordance with the contract, resulting in the entrusted management of the property has no actual value or corresponding protection, the court can presume that the actual loss of the investor has occurred.
In view of the above point of view, the author believes that, on the one hand, if the amount of investors' losses cannot be determined, the investor's claim should be rejected in principle. Based on the characteristics of the asset management business, after the maturity of the asset management product, the profit and loss status of the entire asset management property needs to be finalized through the liquidation process. The investor, as the holder of the asset management product, can only determine whether there is a loss and the specific amount of the loss after the product is liquidated. In addition, where the asset management product has not yet been liquidated, it is difficult to determine the causal relationship between the trustee's breach of fiduciary duty and the investor's loss. On the other hand, in order to protect the investor's right to judicial relief, the trustee may be judged to be liable on a pro rata basis if the total amount of the loss is not determined, but the causal relationship between the trustee's actions and the investor's loss is clear. At this time, although the total amount of loss is not easy to determine, but the proportion of investor loss can be determined according to the size of the trustee's fault, in the case can be determined that the trustee of the asset management products after the liquidation of the investor failed to pay the loss in accordance with a certain proportion of the corresponding liability. Otherwise, if at this time to adhere to the incomplete liquidation and investor losses are not fixed referee thinking, will undoubtedly greatly increase the difficulty of investors to recover investment funds, resulting in substantial unfairness.
(II) whether investor losses include expected gains
In different cases, the investor or based on the contract, or based on tort litigation, the basis of the claim may be different, but the determination of the amount of the investor's loss is an important part of the determination of the investor's breach of contract or tort liability. In the case of a recognized investor who has incurred a loss, the court generally recognizes the principal of the investor's investment as a loss, but there is a different understanding of whether the expected return on the investment agreed upon in the contract is a loss. In my view, in principle, expected returns should not fall into the category of investor losses. First of all, the expected income is not the income that the manager guarantees to obtain, and there are corresponding investment risks for investors to invest in asset management products. Secondly, based on the consideration of preventing "rigid payment", if the investor has no evidence to prove that this part of the expected income actually exists, the expected income should not be recognized as the actual loss of the investor, but only the interest loss of the investor is recognized according to the LPR interest rate of the same period. As Shanghai L Equity Investment Fund Management Co., Ltd., Shanghai T Culture Development Co., Ltd. and other contract disputes with Wang, the judge pointed out that "the expected return does not mean that the manager guarantees that the investor will obtain the corresponding amount of investment income, nor does it mean that the manager guarantees that the principal of the fund will not be lost. Since the plaintiff has not proved the existence of this part of the income, the court does not support it." [Excerpt from (2020) Hu 74 Min Zhong No. 1045]]
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