Analysis of Legal Issues Related to Shadow Margin Lending

Abstract

As a supplement to financing and securities financing, Over-The-Counter financing has always been in the grey area of supervision. Its low-entry threshold, high leverage and low guarantees make OTC Financing one of the “culprits” of the 2015“Stock Crash” in China’s stock market. This article will combine the Minutes of the National Court Work Conference for Civil and Commercial Trials and the Shenzhen OTC Lending Guidelines to analyse problems including the validity of the OTC Financing agreement caused by the OTC Financing behavior, the follow-up processing of the capital account after the relevant financing agreement is determined to be invalid, how to bear the loss after the liquidation operation and if the fundraising party have the “forced liquidation right” from a legal perspective.