CHINA Law and Practice Contributed by: Siyuan Liu, Wei Wang and Huanhuan Yu, Jingtian & Gongcheng
Expansion of the Scope of Matters Subject to Collective Actions In securities litigation, early disputes were confined to the traditional public offering market and stocks trad- ed through exchange quotation systems. However, as recent judicial practice has evolved, securities collec- tive actions have been extended to a broader array of bond markets and securities products. For example, in the Meijite Lamp case, liability arising from secu- rities disclosure violations was extended to asset- backed securities (ABS). In the Wuyang Bond case, the court applied the representative action mecha- nism to bond investors. In the Yeah Info Technology case, the National Equities Exchange and Quotations (NEEQ) market was expressly recognised as subject to the general rules governing securities disputes. The inherent differences among these securities or instru- ments – such as the nature of the issuers, methods of trading, investor composition, price efficiency, market liquidity, and regulatory requirements – are likely to further complicate collective actions in the securities sector. Beyond securities disputes, collective actions in other fields are also emerging. For instance, the Pudong New Area People’s Court in Shanghai applied the ordinary representative action mechanism with an uncertain number of plaintiffs in a commercial real estate lease dispute, in which 342 parties ultimately registered to join the action. These developments collectively demonstrate the trend towards expand- ing the scope of matters subject to collective action mechanisms.
in the future. The securities and financial trial issues contained therein are expected to exert a profound influence on the collective action framework. 5. Key Trends 5.1 Impact of Key Trends The Impact of Institutionalising Representative Actions in Securities Disputes Following the issuance of the Opinions on High-Quali- ty Development of the Capital Market, it is foreseeable that ordinary representative actions with an uncertain number of plaintiffs will be applied more broadly, while cases adopting the special representative action mechanism in the securities sector will also increase. This demonstrates the commitment of Chinese courts and administrative regulators to curbing violations in the securities market. At the same time, it will inevi- tably increase litigation risks and defence costs for market participants, underscoring the need for thor- ough insight into the practice and rules of Chinese securities collective actions. Expansion of the Defendant Pool in Securities Collective Actions Pursuant to the Misrepresentation Judicial Interpre- tation, the scope of entities that may be named as defendants in securities collective actions has been expanded to include counterparties, suppliers, cus- tomers, and financial intermediaries providing ser- vices to the issuers. For instance, in a case before the Nanjing Intermediate People’s Court, a supplier alleged to have assisted the issuer in financial fraud was sued and may bear potential liability. Thus, the risk of collective actions is expected to diffuse beyond issuers, permeating a broader array of market par- ticipants.
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