The case is reprinted from: the official website of the China Securities Regulatory Commission
On May 15, the China Securities Regulatory Commission (CSRC) held the 2024 "5.15 National Investor Protection Publicity Day" in Beijing, and released 10 typical cases of investor protection, including the lawsuit of Zeda Yisheng's special representative, the case of advance compensation of amethystum storage, and the subrogation lawsuit of shareholders of insured institutions.
1. The lawsuit of the special representative of Zeda Yisheng for fraudulent issuance
Zeda Yisheng, a company listed on the Science and Technology Innovation Board, has committed fraudulent issuance and financial fraud for many years, seriously harming the legitimate rights and interests of investors. The China Securities Regulatory Commission (CSRC) has strengthened three-dimensional accountability, imposed administrative penalties on companies and responsible persons, and supported investors in pursuing the civil liability of listed companies and relevant intermediaries and other responsible entities in accordance with the law. In April 2023, the Shanghai Financial Court filed a civil lawsuit against the investor against Zeda Yisheng. In July 2023, the case was converted to a special representative action. In December 2023, the lawsuit of Zeda Yisheng's special representative was concluded by mediation in litigation, and the China Securities Small and Medium-sized Investor Service Center received full compensation of RMB 285 million on behalf of 7,195 qualified investors. This case is the first special representative lawsuit involving a listed company on the STAR Market in China, and the first securities class action settlement case in China, which has achieved good social results 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 advantages of the system of "implicit participation and express withdrawal" in the litigation of special representatives, and resolved group disputes in a centralized and efficient manner. Through the system of public welfare organization representatives, professional support, and litigation fee reduction, the cost of protecting investors' rights and litigation risks have been greatly reduced, and at the same time, it has important demonstration significance for consolidating the responsibilities of relevant entities.
2. Amethystum Storage Advance Compensation Case
In April 2023, Guangdong Amethystum Information Storage Technology Co., Ltd. (hereinafter referred to as Amethystum Storage) was administratively punished by the China Securities Regulatory Commission (CSRC) for fraudulent issuance and information disclosure violations of laws and regulations, and was the first batch of forced delisting cases due to financial fraud on the Science and Technology Innovation Board, which had a huge impact. In May 2023, China Securities Co., Ltd. and other intermediaries jointly funded the establishment of a special fund for advance compensation for amethystum storage incidents, and China Securities Investor Protection Fund Co., Ltd., as a third-party neutral institution, was entrusted to serve as a special fund manager, responsible for the management and operation of the fund. The advance compensation work was completed efficiently within three months, with a cumulative effective claim amount of about 1.086 billion yuan, accounting for 98.93% of the total claim amount, and 16,986 people declaring valid claims, accounting for 97.22% of the total claim payout. The number of applicants, the amount of compensation and the settlement rate of investors are the highest in the previous pre-payment work, and all work has been completed smoothly and achieved good results. The Amethystum Storage Advance Compensation Case has realized the effective combination of administrative law enforcement and civil compensation, saving judicial resources and improving the efficiency of law enforcement. By quickly compensating investors for losses, and resolving relevant civil disputes in a timely manner at the front end, the unity of legal and social effects is realized.
3. Case of subrogation lawsuit by shareholders of insured institutions for the occupation of funds on Modern Avenue
From December 2018 to August 2019, the controlling shareholder's non-operating capital occupied about 240 million yuan. In November 2023, the China Securities Small and Medium-sized Investor Service Center (hereinafter referred to as the Investment Service Center), an investor protection agency, filed a shareholder subrogation lawsuit against Modern Avenue for the occupation of funds, suing its controlling shareholders, actual controllers, and directors for harming the company's interests on behalf of Modern Avenue. The Guangzhou Intermediate People's Court ruled in favor of the Investment Service Center in the first instance, ordering the controlling shareholder, Ruifeng Group, to return the funds and interest occupied by the listed company, and the three individual responsible persons were jointly and severally liable for 100%, 70% and 10% of the funds of the listed company occupied by the controlling shareholder. This case has actively innovated and explored the intersection of shareholder subrogation litigation and bankruptcy liquidation procedures, as well as the form of personal liability, and achieved a 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 embodies the normalized coordination mechanism of financial justice and financial supervision, effectively guides the standardized operation of market entities in the form of precedents, and effectively corrects the chaotic occupation of funds by major shareholders of listed companies.
4. Case of "Model Judgment + Professional Mediation" for False Statements by H Listed Company
Beijing H listed company was subject to administrative penalties for financial fraud for many years. In 2022, the Beijing Financial Court made a first-instance civil judgment in the dispute over liability for securities misrepresentation between the investor and the company, ordering the company to compensate the investor for the corresponding losses according to the calculated amount. Due to the large number of investors involved in this 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, entrusted by the Beijing Financial Court, the Beijing Securities Regulatory Bureau coordinated with 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 have been mediated, and investors have received more than 2,800 yuan in compensation. 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 with the China Securities Legal Service Center and guided the industry associations and Beijing mediation workstations in the jurisdiction, and 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 and mediation docking work.
5. Cracking down on the whole chain of criminal activities of over-the-counter stock allocation platforms
The Shaanxi Securities Regulatory Bureau adheres to the principle of managing the legal and the illegal, continues to deepen cooperation with the public security organs to combat illegal securities, establishes a coordination mechanism, strengthens the transfer of case clues, the identification of the nature, professional support and other work, and cooperates with the Economic Crime Investigation Detachment of the Xi'an Municipal Public Security Bureau to successfully detect a major case of illegal securities operation. In January 2022, after receiving the investor's report on the clues of an online platform, the Shaanxi Securities Regulatory Bureau launched the coordination mechanism as soon as possible, and worked with the Economic Crime Investigation Detachment of the Xi'an Municipal Public Security Bureau to conduct an accurate "portrait" of the operating entity, operation qualifications, and operation mode of the platform. 5 criminal gangs, including the allocation party, arrested 16 criminal suspects (1 person is pending prosecution), involving a transaction amount of 6 billion yuan.
6. Su Davig's misleading statement using the exchange interactive platform
On September 14, 2023, Suzhou Suda Vig Technology Group Co., Ltd. (hereinafter referred to as Suda Vig) misled investors into believing that it could produce chip lithography machines when replying to investors' questions about lithography machines on the interactive platform of the Shenzhen Stock Exchange (hereinafter referred to as "Interactive"), resulting in abnormal fluctuations in the company's stock price and causing a bad impact on the market. On December 29, 2023, the Jiangsu Securities Regulatory Bureau made a penalty decision, giving Su Davig a warning and imposing a fine of 1.5 million yuan, and giving a warning and imposing a fine of 1 million yuan on the relevant person in charge. This case is the first case of illegal information disclosure on the interactive platform systematically investigated and dealt with by the China Securities Regulatory Commission, which has made a breakthrough explanation of the connotation and extension of information disclosure, and created a precedent for cracking down on listed companies using similar interactive platforms to engage in illegal information disclosure, which is highly representative and typical. The investigation and handling of this case has formed a strong deterrent to the common illegal acts of using the voluntary information disclosure platform to make misleading statements in the market, effectively maintained the order of the "three publics" in the capital market, and effectively protected the legitimate rights and interests of investors.
7. *ST Zhongjie reorganization transfer to increase share capital distribution to small and medium-sized shareholders
*ST Zhongjie was ordered by the Higher People's Court of Guangdong Province to be liable for compensation to Guangzhou Rural Commercial Bank in the range of RMB 951.4 million for breach of guarantee. After the company's estimated liabilities are accrued, the net assets are -296.8822 million yuan, and the balance of monetary funds in the consolidated statement 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 the 2022 annual report that cannot express an opinion, *ST Zhongjie shares will be subject to delisting risk alert from May 4, 2023. In May 2023, the company applied to the court for bankruptcy reorganization, and on December 25, 2023, the court approved the company's reorganization plan, which was distributed to all shareholders in accordance with the proportion of shares held by converting capital reserve into share capital, among which the shares distributed to the controlling shareholder and the first actual controller were transferred free of charge to pay off the illegal guaranteed debts, which greatly protected the legitimate rights and interests of small and medium-sized investors.
8. The parties took the initiative to file a mediation case for the misrepresentation dispute 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 three batches of securities misrepresentation disputes between a total of 121 investors and R listed companies. Since the listed company changed its registered address before the civil judgment of first instance, the relevant court of jurisdiction also changed accordingly, and the model judgment took effect later. In order to avoid the uncertainty of the adjudication result caused by the change of the competent court and reduce the cost of litigation, both 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 that the listed company should bear 40% of the liability for the losses of investors, with a total mediation amount of more than 280 yuan. This case is the first securities misrepresentation dispute in which the parties to the dispute took the initiative to apply for mediation, and is an extension of the traditional "model judgment + professional mediation" mechanism, which reflects that mediation, a diversified dispute resolution method, is increasingly accepted by investors and market entities, and the credibility and authority of mediation organizations in the field of securities misrepresentation dispute resolution are constantly improving.
9. Case of Shanghai Weiwan using improper means to circumvent the transaction limit system and over-limit transactions
The three product accounts managed by Shanghai Weiwan Private Equity Fund Management Co., Ltd. and the two natural person accounts under the names of the company's actual controller and his relatives failed to declare the accounts with actual control relationship in accordance with the regulations, violated the exchange trading limit system, and used high-frequency trading methods to trade beyond the trading limit on multiple varieties of stock index futures. In February 2024, the China Financial Futures Exchange took disciplinary measures against the group of customers involved in the case in accordance with regulations, including restricting the opening of stock index futures positions for 12 months and confiscating 8.9348 million yuan of illegal income. The circumstances of this case are serious, the restriction on opening positions is long, and the amount of illegal income confiscated is relatively high, so as to effectively maintain the normal trading order of the market and protect the legitimate rights and interests of investors. The results of the relevant disciplinary actions were disclosed to the market as soon as possible and reprinted by authoritative media, giving full play to the effect of punishment and warning and rule education in the handling of typical cases, demonstrating to the market the determination to protect the legitimate rights and interests of investors from the perspective of exchange self-discipline and supervision, and effectively enhancing investors' confidence and trust in the financial futures market.
10. Case of "Model Judgment + Professional Mediation + Judicial Confirmation" of a listed company's misrepresentation
In recent years, the Shenzhen Securities Regulatory Bureau has instructed the Shenzhen Securities and Futures Industry Dispute Mediation Center, a mediation organization in its jurisdiction, to continue to carry out mediation work in a series of cases of listed company C after the Shenzhen Intermediate People's Court made a model judgment on the dispute over the liability for securities misrepresentation of listed company C, taking into account the criteria of the facts ascertained in the judgment and the application of law. On the one hand, strengthen the close coordination and cooperation of administrative supervision, dispute mediation and court trial, and clarify specific arrangements for case transfer, loss calculation, professional guidance, etc.; On the other hand, judicial confirmation is organized according to the wishes of the parties, giving the mediation agreement enforceability. As of the end of 2023, a total of 364 mediation cases of listed companies have been accepted, and 328 mediation cases have been successfully mediated and all of them have been judicially confirmed, with a mediation success rate of 90.1%, helping investors recover nearly 30 million yuan in losses. Among them, the first batch of cases was successfully mediated within 20 working days after acceptance, and the judicial confirmation decision was quickly obtained within 10 working days, achieving good social effects. In this case, a package of dispute resolution mechanisms such as model judgments, professional mediation, and judicial confirmation was comprehensively used to effectively reduce the cost of investors' rights protection and ensure the effective implementation of investors' rights and remedies.
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