54 Asian Legal Business | December 2024 Commercial Disputes Guidelines on Disputes about Claims Caused by False Statements in the Securities Market 1. Legal Basis of Disputes about Claims Related to False Statements in the Securities Market 1.1 Laws According to the mainstream views in both theoretical and practical law areas of Chinese mainland, false statements in the securities market constitute a specific type of act of tort. Therefore, the elements of such acts and the determination of legal liabilities are governed by both the general provisions on "Tort Liability" in the Civil Code of the People’s Republic of China (referred to as the “Civil Code”) (the seventh edition) and special provisions of the Securities Law of the People’s Republic of China (referred to as the “Securities Laws”). The Securities Laws, as a special law, should take precedence over the general law -the Civil Code. In cases where the "Securities Laws" do not have relevant provisions, the provisions of the Civil Code shall apply. The provisions on tort liability for false statements under the Securities Laws are mainly found in Article 85, which states: "Where any persons liable for information disclosure fail to disclose information in accordance with the regulations, or where the announced securities issuance documents, periodic reports, interim reports, and other information disclosure materials contain false records, misleading statements or material omissions, causing any losses to investors insecurities transactions, the persons liable for information disclosure shall be liable for compensation; the controlling shareholder, actual controllers, directors, supervisors, officers and other directly responsible persons of the issuer, as well as the sponsor, underwriting securities company and their directly responsible persons, shall bear joint and several liability with the issuer, except for those who can prove their innocence." 1.2 Judicial interpretation The securities market features publicity and non-face-to- face transactions. False statements in the securities market constitute a specific type of act of tort, with significant differences from ordinary acts of tort. Publicly listed companies made false statements stand a dominant position compared to ordinary investors. Adjudicating such cases in accordance with the general provisions of "Tort Liability" in the Civil Code would burden the plaintiff disproportionately in terms of proving causation, leading to unfair trial outcomes. The provision in Article 85 of the Securities Laws is overprincipled and cannot be used to address those specific issues in the security market. In view of this, the Supreme People’s Court issued judicial interpretations specifically addressing the application of Article 85 of the Securities Laws in case trials. The judicial interpretation was enacted in 2013 (referred to as the "Old Judicial Interpretation") and underwent a comprehensive revision in 2022 (referred to as the "New Judicature Interpretation"). 2. Key issues involved in the claims dispute by false statements insecurities market 2.1 Determination of false statements Listed companies shall bear the responsibility of disclosing information comprehensively and accurately, which forms the basis of achieving fairness, justice and transparency in the securities market. Chapter VII, Special Chapter of the Securities Laws, stipulates the subjects, requirements for performance, regulatory authorities, and other aspects regarding information disclosure obligations in the securities market. However, violation of the information disclosure obligations under the Securities Laws does not automatically constitute civil liability in terms of tort of false statement. Article 4 and 5 of the New Judicature Interpretation provide definitions of false statements and specific manifestations. In accordance with the provisions of Article 2 of the New Judicature Interpretation, if a plaintiff initiates such a lawsuit, he bears the burden of establishing that the defendant has engaged in false statement conduct. In practice, due to the inherent concealment of false statements, such conduct is often made public only after regulatory authorities have taken notice 证券市场虚假陈述索赔争议指南
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