On November 12, the Guangzhou Intermediate People’s Court made a first-instance judgment on the country’s first securities class action case. The demonstration of the judgment in this case is of great significance. It is a landmark event in the history of the capital market. It is of great significance for promoting the reform and development of the capital market and effectively safeguarding the legitimate rights and interests of investors.
Through the verdict of Kangmei Pharmaceutical, the direction of “punishing the first evil” is clear, which greatly increases the cost of illegal crimes in the capital market, and once again sends a clear and powerful “zero tolerance” signal to all parties in the market.
Huge compensation makes the “first evil” pay its due price
According to the information of the China Securities Regulatory Commission, Kangmei Pharmaceutical has premeditated, organized and systematically implemented financial frauds of about 30 billion yuan for three consecutive years from 2016 to 2018. The amount involved is huge, the duration is long, the nature is particularly serious, the social impact is severe, and the social impact is serious. The legitimate rights and interests of investors have been seriously damaged, and the healthy ecology of the capital market has been severely damaged.
The Guangzhou Intermediate People’s Court made the first-instance judgment and ordered Kangmei Pharmaceutical to compensate securities investors for losses of 2.459 billion yuan due to false statements in the annual report and other infringements. The former chairman and general manager Ma Xingtian and five directly responsible personnel, Zhengzhong Zhujiang Certified Public Accountants and the direct liability The personnel shall bear all joint and several liability for compensation, and 13 related responsible personnel shall bear part of the joint and several liability for compensation according to the degree of fault.
The head of the relevant department of the China Securities Regulatory Commission said that this will help strengthen the punishment and deterrence of criminals in the capital market.
Chen Jie, director of the Commercial Law Office of the Institute of Law of the Chinese Academy of Social Sciences, said that the verdict made the actual controllers and major shareholders of listed companies that infringe on investors’ rights and interests pay their due price to explore and rectify the stubborn diseases of listed companies.
The goal of “punishing the chief evil” in the Kangmei Pharmaceutical case was also achieved through a series of combined punches. According to the person in charge of the relevant department of the China Securities Regulatory Commission, with the coordinated efforts of Guangdong Province and all parties, Kangmei Pharmaceutical announced on October 30 that the Jieyang Intermediate People’s Court has imposed compulsory enforcement on the assets of the company’s controlling shareholder’s related parties, which has amounted to 1.641 billion yuan. It is paid to the company manager’s account to offset the company’s funds occupied by related parties. By recovering the funds occupied by the original major shareholders and actual controllers, it is conducive to better protect the legitimate rights and interests of small and medium investors, and allow listed companies to go back to the battlefield.
Resolve the problem of low illegal cost and take firm steps
In the rapid development of the capital market, financial fraud, insider trading and other chaos have always been the focus of the regulatory authorities.
The implementation of the first-instance judgment of the first securities class action case means that a firm step has been taken to solve the problem of low cost of illegal securities violations. Behind this lies the efforts and exploration of all parties.
——In March 2020, the new Securities Law was implemented, and a securities class action system with Chinese characteristics set sail. Give full play to the role of investor protection agencies, allow them to accept the entrustment of more than 50 investors as special representatives to participate in litigation, and explore the reduction of litigation costs for small and medium investors.
——In July 2020, the Financial Stability and Development Committee of the State Council held its 36th meeting to study the full implementation of the “zero tolerance” work requirements for illegal and criminal acts in the capital market.
——In July 2020, the Supreme People’s Court issued regulations on several issues concerning representative litigation in securities disputes, and the China Securities Regulatory Commission issued the “Notice on Doing a Good Job in Investor Protection Institutions’ Participation in Special Representative Litigations in Securities Disputes”, which was issued by insurance agencies The “China Securities Small and Medium-sized Investor Service Center Special Representative Litigation Business Rules (for Trial Implementation)” provides an institutional guarantee for the implementation of the representative lawsuit system of insurance agencies.
——In July 2021, the Central Office and the Office of the State Council issued the “Opinions on Strictly Cracking Down on Illegal Securities Activities in accordance with the Law”, clearly requiring that the implementation of the representative litigation system for securities disputes be promoted.
Whether it is the improvement of the basic laws of the capital market or the promulgation of high-standard documents, it reflects the firm determination to crack down on illegal securities activities, and the joint efforts of all parties have accelerated the formation.
From perfecting the judicial interpretation of securities civil compensation litigation, to the close interaction between the regulatory and judicial departments, to the trial process of Kangmei Pharmaceuticals… The CSRC, the Supreme Law and local governments continue to explore and implement the “zero tolerance” requirements and actively strengthen regulatory cooperation. Jointly promote the smooth implementation of the first-instance judgment in the first securities class action case.
The person in charge of the relevant department of the China Securities Regulatory Commission said that the China Securities Regulatory Commission expressed support for the court’s decision and will supervise the investor protection agency in accordance with the law and cooperate with the court to do follow-up related work.
Reduce litigation costs and increase investor protection
A sound financial market should allow investors to fully protect their legitimate rights and interests. Once infringed, investors can use mature mechanisms to protect their legitimate rights and interests. The implementation of the securities class action system is conducive to fair and efficient compensation for most of the aggrieved investors.
“Securities class actions can greatly reduce the rights protection costs and litigation risks of damaged investors, and help solve the problems of difficulty in prosecuting and expensive rights protection when the number of damaged investors is large and scattered.” Professor Ye Lin, School of Law, Renmin University of China Say.
Chen Jie believes that the landing of the first securities class action lawsuit is not only of great significance for improving investor protection, but also a key step in shaping a good market ecology.
“With the advancement of the registration system reform, effectively increasing the cost of illegality and strengthening the deterrence of market chaos are the inevitable requirements for the stable and long-term reform and the healthy development of the market.” Ye Lin said, improving investor protection will help form A virtuous circle of investment and financing.
The China Securities Regulatory Commission stated that it will promote the improvement of the representative litigation system and mechanism on the basis of a comprehensive summary of the first case experience, support investor protection agencies to further optimize the case evaluation, decision-making, and implementation procedures, and promote the normalization of special representative litigation in accordance with the law. (Reporter Liu Hui)Return to Sohu to see more
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