CHINA: An Introduction to Securities: Litigation (PRC Firms)

Under Stringent Securities Regulation, the Volume of Securities Misrepresentation Litigation Remains High, With a Broader Range of Securities Products Involved

Against the backdrop of rigorous regulations, characterised by a "sharp and thorny" regulatory environment, securities fraud litigation continues to be one of the issues most closely watched by China's capital markets. Once an issuer faces being investigated, receiving prior notice of administrative penalties, having regulatory measures imposed, being subject to disciplinary actions, issuing a correction notice for accounting errors, facing questions from exchanges, or facing media scrutiny due to information disclosure violations, it will immediately come under the radar of securities litigation lawyers seeking compensation.

As China’s multi-layered capital market system continues to evolve, the scope of securities misrepresentation litigation is gradually expanding. A wider variety of securities products are now involved in these cases. In addition to the traditional secondary stock market and public bond markets, litigation cases have also emerged in non-public offerings, the National Equities Exchange and Quotations (NEEQ), private bonds, convertible bonds, interbank bonds and asset-backed securities.

The Increase in Lawsuits Filed by Institutional Investors, the Expanding Range of Defendants and Growing Concern Over Frivolous Litigation

Against a backdrop of bond default waves, a surge in issuer bankruptcies and the normalisation of delistings of listed companies, many institutional investors have chosen to file securities misrepresentation litigation to recover their investment losses or to diligently fulfil their duties as trustees or managers. Compared to individual investors, higher evidential burdens are imposed on professional institutional investors regarding the causal relationship in transactions.

To increase the likelihood of actual compensation, plaintiffs often name the issuer's directors, supervisors, senior management, controlling shareholders, actual controllers and various securities intermediary organisations that have provided services to the issuer as joint defendants in securities misrepresentation litigation. In order to curb the phenomenon of frivolous litigation where plaintiffs file lawsuits with little to no cost, it is expected that the courts will regulate improper litigation behaviors of plaintiffs on a case-by-case basis in the future. In some cases, plaintiffs also sue parties involved in the falsification, in line with the fundamental principle of "punishing accomplices".

The Model Judgment Mechanism Becomes the Mainstream Approach for Securities Misrepresentation Litigation With the Launch of China’s Third and Fourth Special Representative Actions

The securities dispute resolution mechanism of "court model judgment and parallel case professional mediation" has become the mainstream approach for handling these cases due to the flexibility and efficiency it offers. Following the first special representative action in 2021 in the "Kangmei Pharmaceutical" case, and the first settlement of a special representative action in 2023 in the "Zeda Yisheng" case, the third and fourth special representative actions in China were initiated at the end of 2024.

The New Judicial Interpretation on Securities Misrepresentation has Effectively Guided Judicial Practice, With Landmark Cases Stabilising Market Expectations

In early 2022 and in response to the evolving securities market, the Supreme People’s Court issued the "Several Provisions on the Trial of Civil Compensation Cases for Securities Market Misrepresentation" judicial interpretation, which addressed the gaps and deficiencies in the old judicial interpretation from 2003. This new interpretation effectively met the practical needs of securities misrepresentation judicial practice and the capital market. Judicial practices over the last three years have proven that the new judicial interpretation has been a milestone in the development and improvement of China's securities misrepresentation litigation system, ushering in a new, rational and professional phase in the evolution of these lawsuits. Under the guidance of the new judicial interpretation, courts across the country have issued significant and exemplary cases, which not only effectively penalise and deter misrepresentation but also guide investors to lawfully and rationally protect their rights.

Multiple Controversial Issues in Securities Misrepresentation Litigation Involving Stocks Have Reached Consensus in Judicial Practice

The People’s Courts have over twenty years of experience in adjudicating securities misrepresentation lawsuits involving stocks. As the understanding of the new judicial interpretation deepens, many major controversial issues in stock-related misrepresentation litigation, such as the identification of misrepresentation, the determination of the "three days" and "basic price", and the assessment and exclusion of systematic and non-systematic risks, have essentially reached a consensus in judicial practice. After the new judicial interpretation established the independent status and criteria for determining materiality and causation in transactions, judicial practice has gradually refined its examination of whether misrepresentation is material and whether there is a causal link between the misrepresentation and investors' trading decisions, with increasingly rich perspectives and more mature standards for determination.

The Application of Arbitration in Bond Misrepresentation Cases is Increasing, While Significant Issues Remain Divisive in Judicial Practice

Securities intermediary organisations, due to their responsibility declarations in bond issuance documents, have been determined by courts to be bound by arbitration clauses. In some cases, arbitral rulings have already been made. However, the background of arbitrators in securities law and their experience in misrepresentation cases introduce uncertainty into the outcome of these cases.

In 2024, several judicial precedents addressed the unique issues of bond misrepresentation litigation as distinct from stock misrepresentation litigation, responding with professional rulings and well-reasoned explanations. However, significant issues such as the identification of misrepresentation, the clarification of materiality, the application of the presumption of reliance, the scope of civil compensation and the exclusion of systematic and non-systematic risks remain the subject of considerable disagreement, requiring further in-depth discussion and consensus-building.

Judicial Practice is Becoming More Precise and Rational in Determining Civil Compensation Liability for Intermediaries in Misrepresentation Cases

The reasonable identification of civil liability for intermediary organisations in misrepresentation cases has been significantly guided by the Beijing Financial Court's ruling in the "LeTV" case, which has played a major role in setting a precedent. Judicial practice has largely moved away from indiscriminate liability, blanket liability for all parties involved, and the utilitarian pursuit of the wealthiest defendants. Courts now instead consider factors such as the intermediary’s role, the issues involved, the degree of fault and the causal impact when determining the extent of an intermediary's joint liability in specific cases.

The new judicial interpretation on misrepresentation limits intermediaries’ civil liability to cases of intentional misconduct or gross negligence. In 2024, the exemption clause for intermediaries with “ordinary or minor negligence” was successfully activated, with several cases ruling that intermediaries subjected to only light penalties would not be required to bear civil compensation liability.

The Amount of Civil Compensation for Securities Misrepresentation Constitutes an Independent Standard for Criminal Prosecution, Requiring Securities Market Participants to Place High Importance on Professional Defence Strategies

According to the criminal prosecution standards, a loss of CNY1 million caused by misrepresentation can constitute one of the standards for criminal prosecution for the offence of illegally disclosing or failing to disclose important information. Under the criminal liability pursuit policy of "transferring all that should be transferred" in securities crimes, this should be of great concern to issuers, listed companies and their directors, supervisors and senior management. As securities misrepresentation lawsuits become more routine and the judicial environment becomes increasingly refined, professional defence strategies are playing an increasingly crucial role in the outcomes of these cases. Securities market participants should pay more attention to the professional representation of these cases.

证券严监管形势下虚假陈述诉讼热度不减，涉诉证券产品类型更加丰富

在“长牙带刺、有棱有角”的严管背景下，证券虚假陈述诉讼始终是中国资本市场高度关注的热点问题之一。发行人一旦因信息披露问题被立案调查、行政处罚事先告知、采取监管措施、纪律处分、发布会计差错更正公告、被交易所问询或被媒体质疑，就会立即进入证券维权律师的索赔视野。

随着多层次资本市场体系的完善，虚假陈述诉讼案件涉及的资本市场领域也在逐步扩展，涉诉证券产品呈现多样化态势。除了传统的股票二级市场和公募债市场，非公开发行市场、新三板市场、私募债、可转债、银行间债券、资产支持证券也均出现涉诉案件。

机构投资者起诉案件增多，被告范围不断扩大，滥诉现象值得关注

在债券违约潮、发行人破产潮、上市公司退市常态化的背景下，很多机构投资者为了挽回自有投资损失或者为了勤勉尽责地履行管理人职责，选择提起证券虚假陈述诉讼。相较于自然人投资者，司法审判对于专业机构投资者在交易因果关系的举证责任方面提出了更高的要求。

原告为了增大实际获赔可能性，往往将虚假陈述可能涉及的发行人董监高、控股股东、实际控制人以及为发行人提供过服务的各类中介机构列为共同被告。为遏制原告零成本起诉的滥诉现象，预计未来人民法院将在个案中对原告的不当诉讼行为加以规制。部分案件同时起诉配合造假方，贯彻“惩帮凶”的基本原则。

示范判决机制成为证券虚假陈述诉讼的主流审理方式，我国第三、四例特别代表人诉讼启动

“法院示范判决+平行案件专业调解”的证券纠纷多元化解决机制因其灵活性和高效性，成为此类案件的主流处理方式。继2021年首例特别代表人诉讼“康美药业”案、2023年首例特别代表人诉讼和解案“泽达易盛”案之后，2024年年末，我国第三、四例特别代表人诉讼启动。

新虚假陈述司法解释对司法实践起到了卓有成效的指导作用，经典判例合理稳定资本市场预期

2022年初，最高人民法院发布《关于审理证券市场虚假陈述侵权民事赔偿案件的若干规定》，弥补和完善了2003年旧司法解释随着证券市场发展变化所呈现的缺失与不足，切实回应了证券虚假陈述司法实践和资本市场的现实需求。近三年的司法实践证明，新虚假陈述司法解释对我国证券虚假陈述诉讼制度的发展和完善具有里程碑意义，将我国证券虚假陈述诉讼的发展带入了全新、理性、专业化的新局面。在新司法解释指导下各地法院作出颇具亮点的典型案例，不仅有效制裁和震慑虚假陈述行为，同时引导投资者依法理性维权。

股票类虚假陈述诉讼领域的诸多争议问题在司法实践中基本达成共识

人民法院对股票类虚假陈述诉讼的审判经验已超过二十年。随着对新司法解释的理解日益深入，股票类虚假陈述诉讼中诸多重大争议问题，比如虚假陈述的认定、三日一价的认定、系统风险和非系统风险的考察与剔除等，在司法实践中基本达成共识。在新司法解释确立重大性要件和交易因果关系要件的独立地位和认定规则后，司法实践对虚假陈述是否具有重大性、与投资者的交易决策之间是否存在因果关系的审查上，考察视角日渐丰富，认定标准更加成熟。

债券虚假陈述案件适用仲裁主管的情况增多，不少重大问题在司法实践中仍然分歧较大

中介机构因在债券发行文件中作出责任承担声明而被法院裁定认为应受到仲裁条款的约束，部分案件已有裁决结果，仲裁员是否具有证券法背景及虚假陈述案件研究经验为案件走向带来不确定性。

2024年，多起司法判例直面债券虚假陈述诉讼不同于股票类虚假陈述诉讼的特殊性问题，以专业的裁判和丰富的说理予以回应。但对于虚假陈述行为的识别、重大性内涵的厘清、推定信赖原则的适用、民事赔偿范围的认定、系统风险和非系统风险的剔除等重大问题，各方仍存较大分歧，有待进一步深入研讨和统一认识。

司法实践对中介机构虚假陈述民事赔偿责任的认定日趋精准和理性

关于如何合理认定中介机构虚假陈述责任，北京金融法院“乐视网”案判决发挥了极大的示范效应和指导意义。目前司法实践中已经基本摒弃“处罚必全责”的笼统式追责、“一刀切”的无差别追责和“追首富”的功利性追责，而是在具体案件中根据中介机构的身份角色、所涉事项、过错程度、原因力大小等因素，判决有责任的中介机构承担一定比例的连带责任。

新虚假陈述司法解释将中介机构承担虚假陈述民事赔偿责任的过错限定为故意和重大过失。2024年，中介机构“一般、轻微过失”的免责条款被成功激活，多起案例判决仅被采取轻微惩处措施的中介机构无需承担民事赔偿责任。

证券虚假陈述民事赔偿金额构成刑事犯罪的独立追诉标准，证券市场主体应高度重视专业应诉思路对案件结果的影响

根据刑事立案追诉标准，虚假陈述行为对投资者造成100万元的损失构成违规披露、不披露重要信息罪的刑事立案追诉标准之一。在对证券犯罪“应移尽移”刑事追责政策下，这应该引起发行人、上市公司及其董监高的高度重视。在证券虚假陈述诉讼常态化和审判环境日益精细化的当下，专业的应诉思路对案件结果发挥越来越重要的作用，证券市场主体应更加重视此类案件的专业代理工作。