Follow-up to the execution of the first securities class action: account cancellation or abnormal investors can apply for reimbursement

After the execution of the first securities class action, investors who have not yet received the award of compensation due to account cancellation or other abnormal circumstances may submit materials as required to apply for compensation.

On December 31, the China Securities Small and Medium-sized Investors Service Center (hereinafter referred to as the "Service Center") communicated with the bankruptcy administrator of Kangmei Pharmaceutical (i.e. *ST Kangmei, 600518.SH) and other parties in response to the concerns of investors after the implementation of the first special representative judgment recently, and replied to investors' questions:

1. What should investors who have not yet received the award payment due to account cancellation or other abnormal circumstances?

Step 1: Investors are invited to go through the WeChat Mini Program "Guangzhou Micro Court" - "Micro Litigation" - "Representative Litigation", enter their name and ID card number and verify their real name, click "Inquiry on the Amount of Compensation Payable by the Plaintiff in the Special Representative Litigation", select the resident ID card information or the one-code account number to inquire, and inquire whether they have been compensated and the specific amount.

Step 2: If the investor has inquired about the amount of compensation he should receive through the first step, but the fund account has not yet received the payment, please contact the account opening securities company to inquire.

Step 3: If the investor's account is cancelled or there are other abnormal circumstances, please pay attention to the SMS notice issued by the manager of Kangmei Pharmaceutical, and go to the National Enterprise Bankruptcy and Reorganization Case Information Network to view the "Notice on Providing Account and Identity Information to Creditors of Misrepresentation Class Actions That Have Not Received Cash and Stocks", and submit materials in a timely manner as required.

2. Why do investors whose accounts are cancelled or have other abnormal circumstances need to take the initiative to cooperate with the provision of materials?

The special representative litigation system created by the new Securities Law has the characteristics of "implicit joining and explicit withdrawal", and investors who explicitly indicate to the court that they will not participate in the litigation become plaintiffs in the case and share the results of the litigation.

In order to promote the implementation of the system, the service center participated in the litigation as the representative of more than 50,000 investors, and won the first instance judgment. In order to truly realize the "lying down and collecting money" of investors, after the judgment took effect, the Service Center formed a joint force with the competent court for bankruptcy reorganization of Kangmei Pharmaceutical, the bankruptcy administrator of Kangmei Pharmaceutical, and China Securities Depository and Clearing Co., Ltd. (hereinafter referred to as "China Settlement") to promote enforcement. Regarding the cash part, Kangmei Pharmaceutical transferred the cash to China Settlement based on the list and amount of investors judged by the Guangzhou Intermediate Court, which in turn transferred it to the securities companies opened by the investors, and finally distributed to the investors' capital accounts.

However, in the process of all parties working together to help investors "lie down and collect money", some investor accounts have cancellations or other abnormal circumstances, resulting in the inability to directly distribute in the above way. The bankruptcy administrator of Kangmei Pharmaceutical has issued the "Notice on Providing Account and Identity Information to Creditors of Misrepresentation Class Actions Who Have Not Received Cash and Stocks" on the "National Enterprise Bankruptcy and Reorganization Case Information Network" established by the Supreme People's Court, informing these investors to apply for compensation in a timely manner. The corresponding investor is the plaintiff in this case, in order to protect their legitimate rights and interests, please cooperate with the application in a timely manner.

3. If the investor has not noticed before, what are the legal consequences of exceeding the seven-day time limit for providing materials required by the Notice on the Provision of Account and Identity Information by Creditors of Misrepresentation of Cash and Stocks?

Investors who have been awarded compensation but have not yet been compensated due to account cancellation or abnormality may still apply for compensation in accordance with the requirements of the Notice on The Provision of Account and Identity Information by Creditors of Misrepresentation of Cash and Stocks, but the time of payment may be relatively late.

4. Regarding the right to trust income of more than 300 investors with a judgment amount of more than 500,000 yuan, how will they be received in the future?

After the establishment of the property rights trust, the trustee, Jianxin Trust Co., Ltd., will directly contact the investors with the rights and interests of the trust and ask the investors to cooperate with the preparation materials for registration according to the requirements.

Reviewing the process of the first special representative's lawsuit against Kangmei Pharmaceutical:

In May 2020, the CSRC made an administrative penalty decision on kangmei Pharmaceutical Co., Ltd. and related responsible persons for information disclosure violations and violations.

On December 31, 11 investors submitted an application to the Guangzhou Intermediate People's Court for filing a case and applied for the application of ordinary agent litigation.

On March 26, 2021, the Guangzhou Intermediate People's Court issued an announcement on the registration of the litigation rights of ordinary representatives, and on the same day, the Service Center issued the Explanation of the Service Center Accepting the Entrustment of Investors in the Civil Compensation Case of Kangmei Pharmaceutical's False Statement.

On April 8, the Service Center submitted an application to the Guangzhou Intermediate Court for the transfer of the special representative's lawsuit.

On April 16, the Guangzhou Intermediate People's Court issued an announcement on the registration of the litigation rights of special representatives, marking the formal establishment of the first special representative litigation in China's capital market.

On April 23, the Service Center retrieved the list of rights holders in the Kangmei Pharmaceutical case to China Settlement and submitted it to the Guangzhou Intermediate Court on April 30.

On May 28, the Guangzhou Intermediate People's Court held a pre-trial meeting on the dispute over the misrepresentation liability of Kangmei Pharmaceutical Securities.

On the evening of June 4, Kangmei Pharmaceutical announced that it had received a civil ruling from the Jieyang Intermediate Court, and the court ruled to accept the company's bankruptcy reorganization application.

On June 12, the Guangzhou Intermediate People's Court issued the Announcement on the Qualifications of Plaintiffs in Special Representative Litigation for investors to inquire online about the list of plaintiffs in this case.

On July 22, on behalf of the special representative of Kangmei Pharmaceutical, the Service Center sued all the plaintiff's creditors and declared its claims to the bankruptcy administrator.

On July 27, the kangmei pharmaceutical securities misrepresentation special representative litigation case was held in the first instance of the Guangzhou Intermediate Court, and the plaintiff's representative service center entrusted a lawyer to appear in court to participate in the litigation.

On August 10, the first creditors' meeting of the bankruptcy reorganization case of Kangmei Pharmaceutical was held in Jieyang Intermediate Court, and the service center attended the meeting on behalf of all the plaintiffs and creditors through the Internet, and was elected as one of the nine creditor committee members.

On November 12, the Guangzhou Intermediate People's Court rendered a first-instance judgment, and 52,037 investors represented by the Service Center were awarded a total of about 2.459 billion yuan in damages. At present, the judgment has entered into force.

On November 13, Kangmei Pharmaceutical's Announcement on the Progress of Investors' Civil Litigation Claims mentioned that it would claim relevant rights against 21 defendants who were jointly and severally liable for liquidation in accordance with the judgment.

On November 15, the second creditors' meeting of the bankruptcy reorganization case of Kangmei Pharmaceutical was held, and the service center attended the meeting on behalf of all the plaintiffs and creditors through the Internet.

On the evening of November 19, Kangmei Pharmaceutical issued an announcement that the Second Debt Committee voted to pass the draft reorganization plan. According to the reorganization plan, the creditors of Kangmei Pharmaceutical will be fully repaid after confirmation. Among them, the part of the creditor's rights below 500,000 yuan will be paid off in full cash; the excess part will be repaid by means of equity against debt and trust income rights. The compensation after the confirmation of the securities misrepresentation class action lawsuit will also be paid accordingly after it has become legally effective.

On the evening of November 26, Kangmei Pharmaceutical issued the Announcement on the Court's Ruling on Approving the Company's Reorganization Plan, and the Company entered the implementation stage of the reorganization plan.

On December 21, the first special representative lawsuit of the Service Center began to be executed, and 52,037 investors will receive about 2.459 billion yuan in cash, debt-to-equity swaps, trust income rights, etc.