CHINA Trends and Developments Contributed by: Siyuan Liu, Wei Wang and Huanhuan Yu, Jingtian & Gongcheng
sion-making processes, should not be confirmed as plaintiffs in special representative actions. Instead, they must initiate lawsuits separately. This decision established a standard of review excluding institu- tional investors from the category of eligible plaintiffs in special representative actions, thereby reinforcing the mechanism’s intended focus on protecting retail investors. It also shed light on future refinement of the system in judicial practice. This approach reflects both the courts’ mandate to favour the protection of retail investors, and their care- ful differentiation between securities torts and ordi- nary tort disputes. By allocating evidentiary burdens appropriately and tailoring duties of care, the courts are balancing the interests of plaintiffs and defendants while pursuing more specialised and sophisticated judicial decisions. This demonstrates the fairness and impartiality of Chinese judicial practice, its scientific calibration of judicial discretion, and its rejection of mechanical rule-application in favour of nuanced, principled judgment. Improving and Institutionalising the Collective Actions Mechanism On 15 May 2025, the SPC and the China Securities Regulatory Commission (CSRC) jointly issued theNo- tice of the Guiding Opinions on Strict and Impartial Law Enforcement and Administration of Justice to Serve and Guarantee the High-Quality Development of the Capital Market. The document reiterated the policy of institutionalising representative actions in securities disputes. It is worth noting that this docu- ment also proposed further improvements to court procedures, acceptance and review standards, and evaluation mechanisms for representative actions, thereby providing systemic guarantees for their insti- tutionalisation. The guidance also emphasised facili- tating investors’ ability to resolve disputes through collective mechanisms, reflecting a clear orientation towards protecting vulnerable investor groups. Expansion of Causes of Action and Defendant Pool in Securities Collective Actions On 4 April 2024, the State Council issued Several Opinions on Strengthening Regulation, Preventing Risks and Promoting the High-Quality Development of the Capital Market (“Opinions on High-Quality Devel-
opment of the Capital Market”), declaring its intention to promulgate judicial interpretations on civil compen- sation for insider trading and market manipulation. Subsequently, the SPC formally placed such interpre- tations on its legislative agenda and is currently solicit- ing public comment. Once issued, the cause of action in securities collective actions will extend beyond mis- representation to encompass insider trading, market manipulation, and other securities violations. Moreover, in June 2025, in the YueBoo Power case, the CSRC directly sanctioned a contractual counter- party alleged to have assisted in the issuer’s fraudulent practices. A collective action arising from the fraud is being mobilised by attorneys, and the counterparty is highly likely to be named as a co-defendant. Pursuant to Articles 21 and 22 of the Misrepresentation Judicial Interpretation, this could become the first securities collective action brought against a contractual coun- terparty that is neither a statutory disclosure obligor under the Securities Lawnor an intermediary provid- ing services to the issuers. This development demon- strates that the risks of securities collective actions are beginning to diffuse beyond traditional capital market actors. Multiple Mechanisms to Safeguard the Fairness and Soundness of Adjudication of Collective Redress In securities disputes, Chinese statutes, judicial inter- pretations, and policy guidance reiterate that where professional expertise from other academic disci- plines is required, the courts may engage specialised institutions for technical determinations and consult experts, thereby fully utilising expert witnesses. The Chinese courts have been increasingly innova- tive in this respect. In addition to loss assessments in stock-related misrepresentation cases involving main board issuers, the courts have progressively begun engaging professional institutions to conduct special- ised loss quantification in other securities markets and products. These assessments often employ financial engineering models and other theories and methodol- ogies, thereby enhancing the precision of investor loss calculation across different categories of securities.
86 CHAMBERS.COM
Powered by FlippingBook