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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II ENTERTAINMENT OF CASES AND JURISDICTION CHAPTER III LITIGATION METHODS CHAPTER IV ASCERTAINMENT ON FALSE STATEMENT CHAPTER V CAUSES FOR LIABILITY FIXATION AND EXEMPTION CHAPTER VI LIABILITY FOR JOINT TORT CHAPTER VII ASCERTAINMENT OF LOSSES CHAPTER VIII SUPPLEMENTARY PROVISIONS The present provisions are formulated in accordance with the General Principles of Civil Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Company Law of the People's Republic of China, the Civil Litigation Law of the People's Republic of China and other laws and regulations, as well as in combination with the actual situation of the securities market and judicial practice with a view to correctly trying cases of civil compensation arising from false statement in securities market, regulating the civil conducts in securities market, and protecting the lawful rights and interests of the investors. CHAPTER I GENERAL PROVISIONS Article 1. A case of civil compensation arising from false statement in securities market mentioned in the present provisions shall refer to a case of civil compensation for which an investor in securities market brings a lawsuit to the people's court against the obligor for information disclosure who violates legal provisions by making false statement and thus causing losses to him. Article 2. An investor mentioned in the present provisions shall refer to a natural person, legal person or any other organization that engages in securities subscription or transaction in the securities market. Securities market mentioned in the present provisions shall refer to the issuance market for the issuer to raise shares publicly, the market for securities transaction made through the price quotation system in the securities exchange, the market for securities companies to handle the transfer of shares on behalf of others, or any other securities market established upon the approval by the state. Article 3. The present provisions shall not apply to civil litigations arising from any of the following transactions: (1) transactions made out of the securities market established upon the approval by the state; (2) transactions made by means of agreed transfer in the securities market established upon the approval by the state. Article 4. The people's courts shall, when trying cases of civil compensation arising from false statement in securities market, emphasize mediation and encourage the parties concerned to reconcile each other. Article 5. The limitation period of action for an investor to claim against a false statement maker for civil compensation shall, in accordance with Article 135 of the General Principles of Civil Law, begin separately under the following different circumstances: (1) from the day when China Securities Regulatory Commission or its dispatched office announces the decision on penalty imposed upon the false statement maker; (2) from the day when the Ministry of Finance of the People's Republic of China, any other administrative organ or any institution entitled to impose administrative penalties announces the decision on penalty imposed upon the false statement maker; (3) from the day when a criminal judgment rendered by the people's court on ascertaining the false statement maker who has not been imposed upon an administrative penalty to be guilty becomes effective. Where two or more administrative penalties are imposed upon different false statement makers due to the same false statement; or where there is both an administrative penalty and a criminal punishment at the same time, the limitation period of action shall begin on the day when the decision on the earlier administrative penalty is announced or on the day when the criminal judgment becomes effective. CHAPTER II ENTERTAINMENT OF CASES AND JURISDICTION Article 6. Where a lawsuit for civil compensation brought by an investor against the false statement maker in accordance with a decision on administrative penalty by a relevant organ or in accordance with a criminal order or judgment by the people's court with the reason that he has been infringed upon by the false statement, conforms with Article 108 of the Civil Litigation Law, the people's court shall entertain the lawsuit. Where an investor brings a lawsuit for civil compensation arising from false statement in securities market, he shall, in addition to submitting the decision or announcement on the administrative penalty, or the criminal order or judgment by the people's court, submit the following evidence: (1) the identity certificate as a natural person, legal person or any other organization, or the publicly notarized duplicate thereof in case of failure to provide the original; and (2) evidence materials on investment losses such as documents on the transaction, etc.. Article 7. The defendants in the cases of civil compensation arising from false statement in securities market shall be the false statement makers, including: (1) actual controllers such as initiators, controlling shareholders, etc.; (2) issuers or listed companies; (3) securities underwriters; (4) those recommending the listing of securities; (5) professional intermediation service organizations such as accounting firms, law firms, asset appraisal organizations, etc.; (6) senior managing members such as board directors, supervisors and managers, in the above Item (2), (3) or (4) and direct responsible persons in Item (5); and (7) other institutions or natural persons making false statement. Article 8. The cases of civil compensation arising from false statement in securities market shall be under the jurisdiction of the intermediate people's court of the city where the people's government of the province, municipality directly under the Central Government, autonomous region is located, of the city directly under state planning or of the special economic zone. Article 9. Where an investor brings a lawsuit for civil compensation involving securities against more than one defendant, the jurisdiction of the case shall be in compliance with the following principles: (1) it shall be under the jurisdiction of the intermediate people's court having the jurisdiction and at the issuer's or listed company's locality, the circumstances provided in Paragraph 2 of Article 10 of the present provisions shall be excluded; (2) it shall be under the jurisdiction of the intermediate people's court having the jurisdiction and at the defendant's locality if the lawsuit is brought against the false statement makers other than the issuer or listed company; (3) it shall be under the jurisdiction of the intermediate people's court having the jurisdiction and at the defendant's locality if the lawsuit is brought against a natural person only. Article 10. After the people's court entertains a lawsuit brought against a false statement maker other than the issuer or listed company, it may, upon the application by the party concerned or upon the consent of all the plaintiffs, add the issuer or the listed company to be the joint defendants. Then, the people's court shall refer the case to the intermediate people's court having the jurisdiction and at the issuer's or listed company's locality. Where a party concerned does not apply for adding a joint defendant or the plaintiff does not agree to do so, while the people's court considers it indeed necessary to add him, the people's court shall notify the issuer or the listed company to participate in the litigation as a joint defendant, instead of referring the case to another court. Article 11. Where, after the people's court entertains a case of civil compensation arising from false statement in securities market, the party concerned who has been imposed upon the administrative penalty refuses to accept the administrative penalty and applies for administrative reconsideration or brings an administrative litigation, the people's court may order to suspend the trial. Where, after the people's court entertains a case of civil compensation arising from false statement in securities market, the relevant administrative penalty is revoked, the people's court shall order to terminate the litigation. CHAPTER III LITIGATION METHODS Article 12. The plaintiffs in cases of civil compensation involving securities mentioned in the present provisions may bring separate lawsuits or joint lawsuits. Article 13. Where more than one plaintiff bring lawsuits regarding the same false statement and against the same defendant, and there are separate lawsuit(s) and joint lawsuit, the people's court may notify the plaintiffs bringing separate lawsuit(s) to participate in the joint lawsuit. Where more than one plaintiff bring two or more joint lawsuits regarding the same false statement and against the same defendant, the people's court may combine them into one joint lawsuit. Article 14. The number of plaintiffs in a joint lawsuit shall be determined before the opening of the court. If the number of plaintiffs is large, two to five litigation representatives may be selected, and each litigation representative may entrust one or two agents ad litem. Article 15. A litigation representative shall be specially authorized by the plaintiffs he represents to participate in the hearing, modify or waive claims, and to be reconciled with or to reach conciliation agreements with the defendants. Article 16. The people's court may, when adjudicating the defendant to bear the liability for civil compensation to a large number of plaintiffs, determine the total amount of compensation in the main text of the judgment, and list the name of each plaintiff, the amount of compensation they should receive, etc. and attach such particulars to the civil judgment. CHAPTER IV ASCERTAINMENT ON FALSE STATEMENT Article 17. A false statement in securities market shall refer to any of the behaviors of the obligor for information disclosure in violation of the securities laws, such as making false records on major events by violating the true facts, making misleading statement, having major omissions when disclosing the information or disclosing information inappropriately during the issuance or transaction of securities. A major event shall be ascertained in combination with Article 59, Article 60, Article 61, Article 62, and Article 72 of the Securities Law and the relevant provisions. False records shall mean that the obligor for information disclosure records inexistent facts in the documents of information disclosure when disclosing information. Misleading statement shall refer to the statement made by the false statement maker in the documents of information disclosure or through the media, thus causing the investors to have a wrong estimation of their investments and causing major influence as well. Major omissions shall mean that the obligor for information disclosure fails to wholly or partially record in the documents of information disclosure the particulars that should be recorded. Inappropriate disclosure shall mean that the obligor for information disclosure fails to disclose the information that shall be disclosed within the appropriate time period or fails to publicly disclose the information by legal means. Article 18. Where an investor is under any of the following circumstances, the people's court shall ascertain that there is causality between the false statement and the damage consequence: (1) what the investor invests are securities directly related to the false statement; (2) the investor buys the securities on the date of enforcement of the false statement or after that, until the date of reveal or correction; (3) the investor suffers a loss on the date of reveal or correction of the false statement or after that, due to his sale or continuing holding of the securities. Article 19. Where the defendant produces evidence to prove that the plaintiff is under any of the following circumstances, the people's court shall ascertain that there isn't causality between the false statement and the damage consequence: (1) the plaintiff has sold the securities before the date of reveal or correction of the false statement; (2) the plaintiff invests on the date of reveal or correction of the false statement or after that; (3) the plaintiff invests when he knows clearly the existence of false statement; (4) the losses or part of the losses are caused by other factors such as systematic risks in securities market, etc.; (5) the plaintiff invests maliciously or rigs the securities price. Article 20. The date of enforcement of the false statement mentioned in the present provisions shall refer to the date on which the false statement is made or occurs. The date of reveal of the false statement shall refer to the date on which the false statement is first revealed publicly through medias such as newspapers, radio stations, television stations, etc. that are issued or broadcasted around the whole country. The date of correction of the false statement shall refer to the date on which the false statement maker automatically announces to correct the false statement through the media designated by China Securities Regulatory Commission to disclose securities market information, and goes through the suspension formalities in accordance with the provisions. CHAPTER V CAUSES FOR LIABILITY FIXATION AND EXEMPTION Article 21. The initiators, issuers or listed companies shall bear the liability for civil compensation for the losses caused by their false statement to the investors. Senior managing members such as the board directors, supervisors and managers of an issuer or a listed company who are liable shall bear the joint liability for compensating the losses provided for in the preceding paragraph, unless there is evidence to prove that they have no fault. Article 22. Where an actual controller rigs the issuer or listed company to violate the securities laws by making false statement in the name of the issuer or listed company and thus causing losses to the investors, the liability for compensation may be borne by the issuer or listed company. The issuer or listed company may, after bearing the liability for compensation, recover the compensation from the actual controller. Where an actual controller violates Article 4, Article 5 or Article 188 of the Securities Law by making false statement, and thus causing losses to the investors, he shall bear the liability for compensation. Article 23. The securities underwriter or the person recommending the listing of securities shall bear the liability for compensating the losses caused by his false statement to the investors, unless there is evidence to prove that he has no fault. Senior managing members such as the liable board directors, supervisors and managers, shall bear the joint liability for compensation with the securities underwriter or the person recommending the listing of securities. The cause for exemption of liabilities shall be the same as that provided in the preceding paragraph. Article 24. Where a professional intermediation service organization or any of its direct responsible persons violates Article 161 or Article 202 of the Securities Law by making false statement, and thus causing losses to the investors, it/he shall bear the liability for compensation for the part that it/he is liable, unless there is evidence to prove that he has no fault. Article 25. Where any other institution or natural person making false statement provided for in Item (7) of Article 7 of the present provisions violates Article 5, Article 72, Article 188 or Article 189 of the Securities Law, and thus causing losses to the investors, it/he shall bear the liability for compensation. CHAPTER VI LIABILITY FOR JOINT TORT Article 26. Where an initiator provides guaranty for the issuer's information disclosure, the initiator and the issuer shall bear joint liability for the losses caused to the investors. Article 27. Where a securities underwriter, a person recommending the listing of securities or a professional intermediation service organization who knows or ought to know the issuer's or listed company's false statement, but does not correct it or issue reserved opinions, his behavior shall constitute a joint tort, and he shall bear joint liability for the losses caused to the investors. Article 28. Where the liable senior managing members such as board directors, supervisors or managers, etc. of an issuer, a listed company, a securities underwriter, a person recommending the listing of securities, are under any of the following circumstances, they shall be ascertained as having made the false statement jointly, and shall bear joint liability together with the issuer, listed company, securities underwriter or the person recommending the listing of securities for the losses caused to the investors: (1) they participate in the false statement act; (2) they fail to explicitly show their objection when they know or ought to know the false statement; or (3) other circumstances under which they shall bear the liability. CHAPTER VII ASCERTAINMENT OF LOSSES Article 29. Where a false statement maker makes false statement in the securities issuance market, and thus causing losses to the investors, the investors shall have the right to request the false statement maker to compensate for the losses in accordance with Article 30 of the present provisions. If the false statement causes the securities to be suspended from issuance, the investors shall have the right to request for refund or compensation of the paid stock amount and the interest thereof based on the rate of current bank deposit. Article 30. The scope for the false statement maker to bear the liability for civil compensation in the securities transaction market shall be limited to the losses actually caused to the investors due to the false statement. The actual losses of the investors shall include: (1) loss in investment margin; and (2) commission and stamp duty for the loss in investment margin. The interest of funds involved in the preceding paragraph shall be calculated according to the rate of current bank deposit from the day when the securities were bought or sold or from the base day. Article 31. Where an investor sells securities on the base day or before, his loss in investment margin shall be calculated with the margin between the average price for buying the securities and that for selling being multiplied by the quantity of securities which the investor holds. Article 32. Where an investor sells or still holds securities after the base day, his loss in investment margin shall be calculated with the margin between the average price for buying the securities and that of closing price on the transaction days during the period from the date of reveal or correction of the false statement to the base day multiplied by the quantity of securities which the investor holds. Article 33. The base day for calculating the loss in investment margin shall refer to the expiry date stipulated after the false statement is revealed or corrected, for the sake of determining the reasonable period for calculating the loss in order to limit the compensation to be received by the investors within the scope of losses caused by the false statement. The base day shall be determined on the basis of the following circumstances: (1) from the date of reveal or correction to the day when the accumulative transaction amount of the securities impacted by the false statement reaches 100% of the negotiable part, provided that the transaction amount of the securities transferred under bulk transaction agreement shall not be calculated; (2) if the base day cannot be determined before the opening of the court in accordance with the preceding paragraph, the 30th transaction day following the date of reveal or correction shall be regarded as the base day; (3) if certain investors have withdrawn from the securities transaction market, the date of delisting before the transaction day shall be regarded as the base day; (4) if the securities transaction has been suspended, the transaction day before the suspension day may be regarded as the base day; while if the transaction is restored, the base day may be determined in accordance with Item (1) of the present article. Article 34. The proceeds obtained by an investor based on his identity as a shareholder during the period when he holds the shares, including the shares obtained from conversion of the bonuses, bonus shares, accumulation funds and the allotted shares, follow-on shares, converted and allotted shares purchased by the investor with his investment during the period when he holds the shares, shall not be used to deduct the amount of compensation to be borne by the false statement maker. Article 35. The price and quantity of the invalidated securities shall, when the loss in investment margin is calculated, be calculated as if the right is rehabilitated. CHAPTER VIII SUPPLEMENTARY PROVISIONS Article 36. The present provisions shall come into force on February 1, 2003. Article 37. In case any content in the Circular on the Relevant Issues concerning the Entertainment of Cases on Disputes over Civil Torts Arising from False Statement in Securities Market promulgated by this Court on January 15, 2002 is inconsistent with the present provisions, the latter shall prevail. |
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