Key Litigation Points in Securities Misrepresentation Liability Disputes

Taking Beijing as an example, among first-instance cases of securities misrepresentation liability disputes filed over the past five years, all fall under the jurisdiction of the Beijing Financial Court. II. Litigation Parties (A) Plaintiffs Eligible to File Civil Compensation Claims for Securities Misrepresentation Investors, holders, trustees, and asset management product managers, among others. "Investors" and "holders" include securities investment products lawfully established by market participants such as securities companies, fund management companies, insurance companies, trust companies, and commercial banks. (B) Liable Parties III. Types of Misrepresentation IV. Loss Assessment The scope of civil compensation liability borne by the information disclosure obligor is limited to the plaintiff’s actual losses incurred due to the misrepresentation, specifically including: (A) Investment differential loss; (B) Commission (0.03%) and stamp duty (0.1%) attributable to the investment differential loss. In securities misrepresentation liability disputes, the "Three Dates and One Price" refer to: the date of implementation of the misrepresentation, the date of disclosure (or correction), the benchmark date for calculating investment differential loss, and the benchmark price for calculating investment differential loss. Date of Implementation: The date on which the information disclosure obligor made the misrepresentation or on which the misrepresentation occurred. Date of Disclosure: The date on which the misrepresentation was first publicly disclosed and became known to the securities market via nationally influential media—such as national newspapers, radio stations, television networks, regulatory authority websites, trading venue websites, major portal sites, or industry-renowned self-media platforms. Benchmark Date: The cut-off date prescribed to reasonably delimit the calculation period for losses, thereby confining the plaintiff’s recoverable damages strictly to those caused by the misrepresentation. In a centrally auctioned trading market, the benchmark date is the day on which cumulative trading volume of the affected security—following the date of disclosure or correction—reaches 100% of its freely tradable shares. If the cumulative turnover rate reaches 100% of freely tradable shares within ten trading days following the date of disclosure or correction, the tenth trading day shall serve as the benchmark date; if such 100% threshold is not reached within thirty trading days, the thirtieth trading day shall be the benchmark date. Benchmark Price: The average closing price of each trading day from the date of disclosure (or correction) through the benchmark date, used as the benchmark price for loss calculation.

Practical Guide to Stock Investment Rights Protection (Civil Compensation for Securities Misrepresentation)

II. Three Conditions That Must All Be Met to Pursue Compensation III. Four Key Time Points IV. Scope of Compensable Losses Pursuant to Article 25 of the Provisions on Several Issues Concerning the Application of Law in Civil Compensation Cases Involving Tortious Misrepresentation, the scope of compensation is limited to the investor’s actual losses, including: 1. Investment differential loss (the core component)—calculated as the difference between the average purchase price and the average sale price (or benchmark price), multiplied by the number of shares held; 2. Commission and stamp duty corresponding to the investment differential loss; 3. Interest losses on the above amounts (calculated at the prevailing interest rate for demand deposits with commercial banks). V. Remedies Available (Ordered from Lowest-Cost to Highest-Cost) VI. Statute of Limitations VII. Documents Required for Filing a Lawsuit 1. Identity documentation: photocopy of ID card (for natural persons) or business license (for institutional investors); 2. Evidence of misrepresentation: administrative penalty decision issued by the China Securities Regulatory Commission (CSRC), company announcements, notice of investigation initiation, etc. (if available); 3. Trading records: securities account opening information and transaction statements (stamped with the official seal of the securities firm’s branch office), specifying trade dates, quantities, and prices; 4. Detailed loss calculation: a list of investment differential losses, prepared either independently or with assistance from legal counsel; 5. Complaint: clearly identifying defendants, claims, and factual and legal grounds. VIII. Frequently Asked Questions 8.1 Can I still file a lawsuit without an administrative penalty decision? Yes. Since the entry into force of the new judicial interpretation in January 2022, courts may no longer dismiss or refuse to accept a case solely on the ground that the misrepresentation has not been subject to administrative penalties. However, investors must themselves provide preliminary evidence demonstrating the existence of the misrepresentation, rendering the burden of proof comparatively heavier.

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