Typical cases of investor protection

(Published on May 15, 2024)

1. Zeda Yisheng fraud issue special representative lawsuit.

The company's listed company, Zeda Yisheng, has fraudulent issuance and financial fraud for many years, seriously harming the legitimate rights and interests of investors. The China Securities Regulatory Commission has strengthened three-dimensional accountability, imposed administrative penalties on companies and responsible persons, and supported investors in investigating the civil compensation liabilities of responsible entities such as listed companies and related intermediary agencies in accordance with the law. In April 2023, the Shanghai Financial Court filed a civil lawsuit against investors against Zeda Yisheng. In July 2023, the case was converted to a special representative action. In December 2023, Zeda Yisheng Special Representative's lawsuit was settled by mediation, and the CSI Small and Medium Investor Service Center received full compensation of 0.285 billion yuan on behalf of 7,195 eligible investors. This case is the country's first case involving a special representative of a listed company on the Science and Technology Innovation Board, and it is also the first case of China's securities class action settlement. The case has achieved good social effects and was rated as one of the top ten typical cases of the Shanghai Financial Court in 2023. The Zeda Yisheng case gave full play to the institutional advantages of "implied accession and express withdrawal" in the special representative litigation, and concentrated and efficient resolution of group disputes. Through the system of representatives of public welfare institutions, professional support and litigation fee reduction, the cost of rights protection and litigation risk of investors are greatly reduced, and at the same time, it has an important demonstration significance for the compaction of the relevant subject responsibility.

2. Amethyst Storage Advance Payment Case

In April 2023, Guangdong Amethyst Information Storage Technology Co., Ltd. (hereinafter referred to as Amethyst Storage) was administratively punished by the CSRC for fraudulent issuance and information disclosure violations, which was the first case of forced delisting due to financial fraud on the board, with a huge impact. In May 2023, China Securities Investment Securities Co., Ltd. and other intermediary agencies jointly funded the establishment of a special fund for the advance compensation of the amethyst storage event. China Securities Investor Protection Fund Co., Ltd., as a third-party neutral institution, was entrusted to act as a special fund manager and was responsible for the fund. Management and operation. The advance compensation work was completed efficiently within three months. The cumulative amount of effective compensation declared was about 1.086 billion yuan, accounting for 98.93 of the total amount of compensation. The number of effective compensation declared was 16,986, accounting for 97.22 of the total amount of compensation. The number of applicants, the amount of compensation and the settlement rate of investors are the highest in all previous advance compensation work, and all the work has been completed smoothly and achieved good results. Amethyst storage advance compensation case realizes the effective combination of administrative law enforcement and civil compensation, saves judicial resources and improves the efficiency of law enforcement. Through the rapid compensation of investors' losses, the relevant civil disputes are resolved in a timely manner at the front end to achieve the unity of legal and social effects.

3. Insurance Agency Shareholder Subrogation Litigation Modern Avenue Fund Occupancy Case.

Modern Avenue from December 2018 to August 2019, the controlling shareholder non-operating occupation of funds of about 0.24 billion million yuan. In November 2023, the Investor Protection Agency CSI Small and Medium-sized Investor Service Center (hereinafter referred to as the Investment Service Center) filed a shareholder subrogation lawsuit against Modern Avenue for the appropriation of funds, and on behalf of Modern Avenue sued its controlling shareholders, actual controllers and directors for harming the interests of the company. The Guangzhou Intermediate People's Court ruled in favor of the Investment Service Center in the first instance, and ordered the controlling shareholder Ruifeng Group to return the funds and interest occupied by the listed company. The three individual responsible persons accounted for 100, 70%, and 10% of the listed company's funds occupied by the controlling shareholder. Within the scope of joint and several liability. This case has actively and innovatively explored the cross-legal issues between shareholder subrogation litigation and bankruptcy liquidation proceedings, as well as the form of personal liability, and achieved a zero breakthrough for the insurance institution to file subrogation litigation in bankruptcy proceedings, and safeguarded the legitimate rights and interests of listed companies and all their investors in accordance with the law. At the same time, this case strongly reflects the normalized coordination mechanism of financial justice and financial supervision, which effectively guides the standardized operation of market subjects by means of jurisprudence, and effectively corrects the chaos of capital occupation by major shareholders of listed companies.

4. H listed company misrepresentation "model judgment professional mediation" case.

Beijing H listed company has been subject to administrative penalties for years of financial fraud. In 2022, the Beijing Financial Court made a first-instance civil judgment on the dispute between the investor and the company's securities misrepresentation liability, and ordered the company to compensate the investor for the corresponding losses according to the calculated amount. Due to the large number of investors involved in the case and the strong willingness of most investors to mediate, the Beijing Financial Court resolved the remaining nearly 600 parallel cases through multiple dispute mediation methods to effectively protect the legitimate rights and interests of investors. In February 2023, at the entrustment of the Beijing Financial Court, the Beijing Securities Regulatory Bureau coordinated the China Securities Capital Market Legal Service Center (hereinafter referred to as the China Securities Legal Service Center) and industry mediation organizations to promote the implementation of the first "model judgment professional mediation" in the jurisdiction. By the end of 2023, a total of 413 cases had been mediated, with investors receiving compensation of more than 28 million yuan. In response to the problems of multi-party prosecution and repeated trial of similar cases in the securities market, the Beijing Securities Regulatory Bureau coordinated the China Securities Legal Service Center and guided the industry associations and Beijing mediation workstations in the jurisdiction. The Beijing Financial Court established a "model judgment professional mediation" mechanism of "similar handling of similar cases", laying a solid foundation for the jurisdiction to continue to carry out the "general-to-general" online litigation docking work.

The case of 5. cracking down on the whole chain of criminal activities of over-the-counter stock allocation platform.

The Shaanxi Securities Regulatory Bureau insists on managing legality and even more illegal, continues to deepen cooperation with public security organs in the fight against illegal securities, establishes a cooperation mechanism, strengthens the transfer of case clues, identification of the nature, and professional support, and successfully cracked a major case of illegal securities operation in conjunction with the Economic Crime Investigation Detachment of the Xi'an Public Security Bureau. In January 2022, after the Shaanxi Securities Regulatory Bureau received clues from investors to report the funding of a certain network platform, it immediately activated the cooperation mechanism, and worked with the Economic Crime Investigation Detachment of the Xi'an Public Security Bureau to conduct the funding platform's operating entities, operating qualifications, and operating models. Accurate "portrait", held several case communication meetings, clarified the thinking of case investigation, took multiple measures to find out the modus operandi and organizational structure, and found out the suspected criminal facts, and issued timely identification opinions, successfully knocked out five criminal gangs, including the production and maintenance of the stock allocation platform, the construction and operation of the platform, the agency promotion and the allocation of funds, and arrested 16 suspects (1 to be prosecuted), involving a transaction amount of 6 billion yuan.

6. case of sdavig using exchange interactive platform for misleading statements

On September 14, 2023, Suzhou Sudaweige Technology Group Co., Ltd. (hereinafter referred to as Sudaweige) responded to investors' questions about lithography machines on the Shenzhen Stock Exchange Interactive Easy Platform (hereinafter referred to as Interactive Easy), misleading investors that It can produce chip lithography machines, causing abnormal fluctuations in the company's stock price, which has a bad impact on the market. The Jiangsu Securities Regulatory Bureau made a penalty decision on December 29, 2023, giving Su Daweige a warning and imposing a fine of 1.5 million yuan, and giving a warning to the relevant person in charge and imposing a fine of 1 million yuan. This case is the first case of illegal information disclosure of interactive easy platform investigated and dealt with by the CSRC system. It has made a breakthrough explanation on the connotation and extension of information disclosure, and set a precedent for cracking down on the illegal behavior of information disclosure by listed companies using similar interactive easy platform, which is highly representative and typical. The investigation and handling of the case has formed a strong deterrent to the illegal act of using voluntary information disclosure platform to make misleading statements, which is common in the market, effectively maintains the "three public" order of the capital market, and effectively protects the legitimate rights and interests of investors.

7. * ST Zhongjie reorganization in the transfer of share capital to small and medium-sized shareholders distribution case.

* ST Zoje was ruled by the Guangdong Provincial Higher People's Court to be liable to Guangzhou Agricultural Commercial Bank for compensation within the range of 951.4 million yuan due to illegal guarantee. After the company's projected liabilities, the net assets are -296.8822 million yuan, and the balance of the consolidated statement of monetary funds is only 121.7158 million yuan. In 2022, the company was issued an audit report by an accounting firm that could not express an opinion. In view of the negative net assets of * ST Zhongjie and the audit report issued by the accounting firm in 2022, * ST Zhongjie stock has been subject to delisting risk warning since May 4, 2023. In May 2023, the company applied to the court for bankruptcy and reorganization. On December 25, 2023, the court approved the company's reorganization plan, which was distributed to all shareholders in the form of capital reserve conversion to share capital in accordance with the shareholding ratio. The shares distributed by the actual controller were transferred free of charge to pay off the illegal guarantee debts, which greatly protected the legitimate rights and interests of small and medium investors.

The parties to the 8. initiated the mediation case of the dispute over the misrepresentation of R listed company.

In 2023, the China Securities Capital Market Legal Service Center (hereinafter referred to as the China Securities Legal Service Center) successively accepted 3 batches of securities misrepresentation disputes between a total of 121 investors and R listed companies. As the listed company changed its registered address prior to the first instance civil judgment, the relevant competent court changed accordingly, and the model judgment took effect thereafter. In order to avoid the uncertainty of the outcome of the decision caused by the change of the jurisdiction court and reduce the cost of litigation, the parties jointly chose to apply to the China Securities Legal Service Center for mediation based on their past cooperation experience with the China Securities Legal Service Center. After mediation, the two parties reached a mediation plan and agreed to refer to the model judgment, and the R listed company will bear 40% of the compensation liability for the investor's losses, with a total mediation amount of more than 280 million yuan. This case is the first securities misrepresentation dispute initiated by the parties to the dispute to initiate mediation. It is an extension of the traditional "model judgment professional mediation" mechanism. It reflects that mediation, a diversified dispute resolution method, is increasingly being used by investors and market parties. Accepted by all parties, the credibility and authority of mediation organizations in the field of securities misrepresentation dispute resolution are constantly improving.

9. Shanghai Weiwan used improper means to circumvent the trading limit system, over-limit trading case.

The three product accounts managed by Shanghai Weiwan Private Equity Fund Management Co., Ltd. and the two natural person accounts under the name of the company's actual controller and his relatives failed to declare the actual control relationship accounts in accordance with the regulations, violated the exchange trading limit system, and used high-frequency trading to exceed the trading limit on multiple varieties of stock index futures. In February 2024, the China Financial Futures Exchange took disciplinary measures against this group of customers involved in the case in accordance with regulations, including restricting the opening of stock index futures for 12 months and confiscating 8.9348 million yuan of illegal income. The circumstances of this case are serious, the restricted opening time is long, the amount of confiscated illegal income is high, and the normal trading order of the market is effectively maintained and the legitimate rights and interests of investors are protected. The results of relevant disciplinary actions were immediately disclosed to the market and reprinted by authoritative media, giving full play to the disciplinary warning and rule propaganda effect of typical case handling, demonstrating to the market the determination to protect the legitimate rights and interests of investors from the self-regulatory dimension of the exchange, and effectively enhancing investors' confidence and trust in the financial futures market.

10. C listed company misrepresentation "model judgment professional mediation judicial confirmation" case.

In recent years, the Shenzhen Securities Regulatory Bureau has guided the mediation organization of the Shenzhen Securities and Futures Industry Dispute Mediation Center. After the Shenzhen Intermediate People's Court made a model judgment on the case of C listed company's securities misrepresentation liability dispute, combined with the facts determined in the judgment and the application of law and other standards, Continue to carry out the mediation work of a series of cases of C listed companies. On the one hand, strengthen the close cooperation between administrative supervision, dispute mediation and court trial, and clarify the specific arrangements for case transfer, loss calculation, professional guidance, etc.; on the other hand, organize judicial confirmation according to the wishes of the parties, and give the mediation agreement enforcement power. By the end of 2023, a total of 364 mediation cases of C listed companies had been accepted, 328 mediation cases were successful and all judicial confirmation was completed, with a mediation success rate of 90.1 per cent, helping investors recover losses of nearly 30 million yuan. Among them, the first batch of cases were successfully mediated within 20 working days after the case was received, and the judicial confirmation and ruling were quickly obtained within 10 working days, which achieved good social effects. The case makes comprehensive use of a package of dispute resolution mechanisms, such as model judgment, professional mediation and judicial confirmation, to effectively reduce the cost of investors' rights protection and ensure that investors' rights relief is effectively implemented.

Original link:http://www.csrc.gov.cn/csrc/c100210/c7480514/7480514/files/2dd6c31639da4d8b8646f3980e568735.pdf

Source: SFC