Typical cases of investor protection

(Issued May 15, 2023)

1. Xianyan Manipulation of the Securities Market Civil Tort Compensation Case.

In October 2022, the Shanghai Financial Court, in the trial of 13 plaintiff investors v. defendant Xianyan's manipulation of the securities market civil tort case, in accordance with the principle of priority of civil compensation established by the Securities Law, the fines and forfeitures in criminal cases of Xianyan's manipulation of the securities market were preserved accordingly, giving priority to the enforcement of the liability determined by the civil judgment. The first-instance judgment of the case is Xianyan to compensate investors for losses of more than 470 million yuan. At present, the preservation payment has been implemented to maximize the relief of the rights of small and medium investors. This case successfully implemented the provisions of the Securities Law on the priority of civil compensation. It is the first securities infringement case in the country to implement the priority of civil compensation liability. Together with the administrative supervision of the Shanghai Securities Regulatory Bureau and the criminal judgments of judicial organs, it forms a three-dimensional approach to criminals in the capital market. Three-dimensional accountability plays an important role in building a "big insurance" and "full chain" investor protection pattern, further protecting the legitimate rights and interests of investors and boosting investor confidence

2. bankruptcy reorganization of listed companies misrepresentation liability dispute mediation case.

In October 2022, Zhejiang Securities Association and China Securities Capital Market Legal Service Center accepted the entrustment of Hangzhou Intermediate People's Court to mediate a series of disputes over the liability for securities misrepresentation between investors and a bankrupt and reorganized listed company, helping 993 investors recover losses of about 0.18 billion yuan. Mediation work is faced with difficulties such as a large number of investors, a wide distribution area, and a long time for disputes, which makes mediation extremely difficult. However, this case relies on the advantages of the "general-to-general" online diversified resolution system, and through the joint promotion of the "general-to-general" online litigation and offline litigation, the mediation organization mediation and the bankruptcy administrator strive for reconciliation, and the dispute mediation and bankruptcy reorganization are promoted as a whole, thus achieving multiple goals such as protecting the legitimate rights and interests of investors, resolving the risks of listed companies and improving the quality of listed companies. This case is a typical case of mediation of securities misrepresentation disputes of listed companies in bankruptcy reorganization, a successful attempt to resolve group disputes in the process of bankruptcy reorganization of listed companies, and a powerful exploration to comprehensively improve the quality of diversified resolution of securities and futures disputes.

3. delisted company misrepresentation liability dispute mediation case.

In 2022, the Sichuan Securities and Futures Industry Association accepted the entrustment of the Chengdu Intermediate People's Court to conduct litigation mediation in a dispute between investors and a delisted company's securities misrepresentation liability. During the "principle home" period of epidemic control in Chengdu, the association overcame difficulties such as inconvenience at home, document signing and document transmission, quickly communicated the case and mediation points with the court, listened patiently to the demands of both parties, explained cases and rules in detail, flexibly handled emergencies, completed online mediation through the "general-to-general" mechanism and the "model judgment online mediation" mechanism, and assisted investors in quickly getting compensation. This case is a typical case of mediation of disputes over the liability of false statements of delisted companies, which reflects the advantages of convenient and efficient online mediation, and fully demonstrates the important role of mediation in resolving conflicts and disputes in the field of securities and futures. it is of positive significance to effectively protect the legitimate rights and interests of investors.

4. insurance institution shareholder subrogation litigation big wisdom director supervisor high damage to the company's interests case.

On February 20, 2023, the China Securities Small and Medium Investor Service Center initiated the country's first single insurance institution shareholder subrogation lawsuit-Shanghai Great Wisdom Co., Ltd. (hereinafter referred to as Great Wisdom) Dong Jiangao's dispute over damage to the company's interests was settled through mediation. The controlling shareholder, The former chairman and general manager Zhang Mouhong paid a full compensation of 861400 yuan, and paid legal fees and legal fees. The plaintiff's request for investment and service center was fully realized, the Shanghai Financial Court ruled to allow the plaintiff to withdraw the lawsuit. On the same day, the derivative lawsuit of Great Wisdom v. Dong Jiangao's recovery case was successfully mediated in court, and the two cases of Great Wisdom Company will receive a total compensation of about 0.335 billion yuan. This case is the first shareholder subrogation lawsuit filed by an insurance institution in the country, and it is also the first case filed by an insurance institution in the country to recover compensation from the company's directors and supervisors after a listed company was ordered to bear civil liability for securities fraud. Through subrogation litigation, it has played a positive effect of deterring the "key minority" and pursuing the "first evil", and avoided the secondary harm to the existing shareholders of listed companies. This is a concrete manifestation of the implementation of financial justice and regulatory coordination requirements, and it is also a better balance. A typical case of listed company interests and investor protection.

5. New Third Board Delisted Company Misrepresentation Liability Dispute Mediation Application of Undisputed Facts Recorded Mechanism

A new third board delisting company was administratively punished by the Jiangsu Securities Regulatory Bureau in 2019 for suspected information disclosure violations, and investors sued the Nanjing Intermediate People's Court for compensation for losses caused to investors due to the company's false statements, while requiring the company's host brokerage and accounting firms to bear joint and several liability. At the beginning of 2022, after accepting the mediation entrusted by the Nanjing Intermediate People's Court, the China Securities Capital Market Legal Service Center contacted the host judge and the parties to the dispute in a timely manner. During the mediation process, although the parties could not reach an agreement on the plaintiff's claim, they made false statements. The four aspects of the "implementation date", "disclosure date", "base date" and "base price" reached a consensus. After the mediator obtained the consent of the parties, the fact that there is no dispute between the two parties in the mediation process shall be recorded in written form, and the parties shall sign and confirm, and the "three-day one price" confirmed by the parties shall be fed back to the Nanjing Intermediate people's Court in writing. In the subsequent proceedings, the parties do not need to prove the undisputed facts confirmed in the mediation process. This is a useful attempt to implement the Opinions of the Supreme People's Court and the China Securities Regulatory Commission on Comprehensively Promoting the Construction of a Diversified Resolution Mechanism for Securities and Futures Disputes (Law [2018] No. 305), and to explore the establishment of a mechanism for recording undisputed facts. It is conducive to improving the quality and efficiency of multiple dispute resolution mechanisms such as litigation and mediation docking, and can effectively reduce the burden of litigation in the people's courts, and form a successful experience that can be promoted and replicated.

6. Tangtang Certified Public Accountants Failure to Diligent and Due Diligent Administrative Penalty Case

Shenzhen Tangtang Certified Public Accountants (hereinafter referred to as Tangtang Institute) signed a "drawer" agreement with * ST Xinyi knowing that the audit business of * ST Xinyi's annual report had been "rejected" by other accounting firms in the audit of * ST Xinyi's annual report, promising not to issue "unable to express opinions" or "negative opinions" in the audit report ", it also requires that if the situation is punished by the regulatory authorities * ST New Billion should be compensated. Its audit independence is seriously lacking, the audit procedure has many defects, the audit report has false records and major omissions, and lacks due professional ethics and bottom line. On February 25, 2022, Tangtang was administratively punished by the CSRC for failing to perform its duties diligently, becoming the first accounting firm to be "fined six", and three relevant certified public accountants were banned from the securities market for 3-10 years at the same time. On April 28, 2022, * ST New Billion was delisted by the Shanghai Stock Exchange. This case is the first case of an accounting firm's loss of independence and failure to exercise due diligence under the filing system investigated and dealt with by the China Securities Regulatory Commission after the implementation of the new Securities Law. The whole chain investigates the legal responsibility of listed companies, audit institutions and intermediaries to engage in illegal acts in collusion, which has played a legal and social effect of deterring illegal acts and purifying the market ecology, Effectively promote audit institutions to return to their duties and effectively safeguard the legitimate rights and interests.

7. Hao Ou Bo failed to disclose the administrative penalty case of capital occupation as required.

The Jiangsu Securities Regulatory Bureau quickly investigated and handled the first administrative penalty case of the company, indicating a clear regulatory attitude of "zero tolerance" for the violation of the board. In December 2022, Jiangsu Securities Regulatory Bureau issued a "Decision on Administrative Punishment" to Haoobo Biomedical Co., Ltd. On the basis of clear facts and sufficient evidence, it failed to disclose the capital occupation behavior as required, and imposed a total fine of 3.6 million yuan on Haoobo Company and the actual controller, accounting for 21% of the illegal occupation amount, and urged the actual controller to return the occupied funds in time. Implement the requirements of "double investigation of one case", verify the diligence and due diligence of the sponsor's continuous supervision work, and take administrative supervision measures against the relevant responsible parties. In the process of investigating and dealing with the case, Jiangsu Securities Regulatory Bureau adhered to the "one game of chess" in law enforcement and risk disposal, comprehensively considered the epidemic situation, market and other factors, guided the company to fully disclose the information of filing a case, properly responded to public opinion and calls from investors, reminded the local government to pay attention, and urged the sponsor institutions to cooperate closely to ensure the stability of the company's operation and stock price. The investigation and handling of the case has achieved good legal and social effects. The mainstream media has carried out positive reports, and investors have praised it one after another, which effectively guarantees the long-term and healthy development of the Science and Technology Innovation Board and effectively protects the legitimate rights and interests of the majority of small and medium investors.

8. Ziguang Group Judicial Reorganization Case

Ziguang Group was in liquidity trouble due to disorderly merger and acquisition expansion in the early stage, and debt risk broke out at the end of 2020. In July 2022, the implementation of the reorganization plan of Ziguang Group was completed, and the priority class of claims and ordinary claims below 1.2 million were settled in full in cash, with an overall settlement rate of more than 95%. Ziguang Group's judicial reorganization procedures are standardized and transparent, and the company's production and operation are stable and orderly. At the same time, the bond trustee represents the bondholders to enter the debt committee, and the bondholders' representatives participate in the selection of strategic investors, and the investors' right to know, participate, The decision-making power is protected to the maximum extent. In addition, through the introduction of strategic investors, to enhance the level of specialization of restructuring. Through the rule of law, the judicial reorganization of Ziguang Group effectively protects the legitimate rights and interests of investors and realizes the disposal of bond default risk, which has a good demonstration effect.

9. Deao shares to promote the inspection and law enforcement and risk resolution work

Guangdong Securities Regulatory Bureau co-ordinates the investigation and risk resolution of the case, in the investigation of the jurisdiction involved in the "Delong system" listed company Deao General Aviation Co., Ltd. (hereinafter referred to as Deao shares or companies) a total of 2.5 billion yuan of huge illegal guarantee cases at the same time, to promote the smooth delisting of Deao shares. "Delong system" related cases involving Deo shares, Zhongjie resources, trendy energy and other listed companies. The Guangdong Securities Regulatory Bureau cooperates closely with other local securities regulatory bureaus to promote the quick investigation and handling of cases, and takes the initiative to connect with judicial organs, unify the identification standards, and form a three-dimensional accountability consensus of "administrative accountability of listed companies and criminal accountability of supervisors". Investigate the responsibility of major shareholders who infringe on the interests of investors.

At the same time, we should give full play to the cooperation mechanism of the Bureau, jointly supervise Deao shares with Shenzhen Stock Exchange to do a good job in delisting risk warning announcement and investor explanation, and inform the local government of the delisting risk twice, cooperate with the dispute handling and stability maintenance work, promote the local government to implement the main responsibility of risk disposal, and effectively protect the legitimate rights and interests of investors. In June 2022, Deo shares were smoothly delisted from the Shenzhen Stock Exchange. This case is a typical case that protects the legitimate rights and interests of investors throughout the entire process of inspection and law enforcement. It provides a useful reference for subsequent investigations of similar cases and has a strong demonstration significance.

10. multiple strategies to promote Shaanxi Construction shareholders to fulfill their performance commitments

Shaanxi Construction Engineering implemented a major asset restructuring in 2018, but the restructured asset Beiyou Project achieved a net profit of -8.9548 million yuan in 2020, which did not reach the 199.2206 million yuan stipulated in the performance commitment agreement. The committed parties, such as state-owned shareholders, natural persons and private shareholders, delayed the fulfillment of their performance commitments for various reasons, such as the cause of the epidemic and the maintenance of customer relations with state-owned enterprises, which seriously affected the legitimate rights and interests of the majority of small and medium-sized shareholders. After the Shaanxi Securities Regulatory Bureau discovered the situation in its daily supervision, it attached great importance to it, conducted in-depth research, and understood the root causes of differences of opinion through field visits. On the basis of finding out the reasons for the differences among shareholders, respecting the interests of the former shareholders and objectively analyzing the impact of the epidemic, we coordinated the listed company and the former shareholders to reach a consensus respectively, and through unremitting efforts, the shareholders of each commitment party settled the performance compensation payment, and the performance commitment compensation work was successfully concluded. The solution of Shaanxi Construction Engineering's performance commitment is the result of full communication, close cooperation and joint promotion under the guidance of the CSRC, and it is also a concrete embodiment of the "3.1 line" mechanism to give full play to the regulatory effectiveness. the cooperation of local government departments also plays a positive role in promoting the priority fulfillment of performance commitments by state-owned shareholders.

Original link:http://www.csrc.gov.cn/csrc/c100210/c7408615/7408615/files/75af57a1f8574ed2a5281030b5d83ff6.pdf

Source: SFC