On 30 Dec. 2021, China’s Supreme People’s Court (SPC) issued the “Several Provisions on the Trial of Cases of Civil Damages for False Statement Infringement in the Securities Market” (hereinafter “the Provisions”, 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), with effect from 22 Jan. 2022.
The Provisions mainly clarifies the determination of false statement, the materiality of false statement, the causality of transactions, and the determination of liability.
In 2021, the number of lawsuits and the number of claims arising from false statements in the securities market hit a record high.
According to public information, at least 40 listed companies were sued for false statements in the securities market in 2021.
On 12 Nov. 2021, the Guangdong Intermediate People’s Court released the trial ruling of the Kangmei Pharmaceutical case. It is not only the first special representative litigation in China, but also sets a historical high in the amount of damages (CNY 2.459 billion) and the number of people compensated (52,000 shareholders).
Under this circumstance, the SPC has stipulated the Provisions in consultation with the China Securities Regulatory Commission and other regulatory authorities, in order to regulate the securities market.
According to the Provisions, the people’s courts shall consider it a false statement, where an information disclosure obligor makes false records, misleading statements or material omission in the disclosed information in violation of laws, administrative regulations, regulations, and regulatory documents on information disclosure by regulatory authorities.
The plaintiff could file a lawsuit with a court requiring the direct award of damages from the relevant controlling shareholders or beneficial owner of the issuer of the securities.
Cover Photo by Wengang Zhai on Unsplash
Contributors: CJO Staff Contributors Team
