How are stock-related compensation claims handled?

Record the number of shares you still held at market close on the announcement date. Article 27 calculates losses only for those shares purchased during the ‘window period’—not the total loss reflected in your securities account. Your brokerage’s mobile app usually allows you to export transaction records. After exporting, save a copy separately to a cloud storage service or email—do not store it solely in your phone’s photo gallery. Does selling shares after case filing invalidate your claim? Whether or not to sell is an investment decision. I will not make that decision for you under the guise of ‘participating in the claim.’ The calculation rules can be clarified upfront. Per Article 27 of the Judicial Interpretation [2022] No. 2, for stocks purchased on the centralized bidding market after the ‘implementation date’ but before the ‘exposure date’ or ‘correction date,’ there are two scenarios: (1) If sold between the exposure/correction date and the ‘benchmark date,’ compensation equals the difference between the average purchase price and the average sale price, multiplied by the number of shares sold. (2) If not sold by the benchmark date, compensation equals the difference between the average purchase price and the benchmark price, multiplied by the unsold quantity. The benchmark price is *not* the closing price on the day after the case filing. As defined in Article 26, it is the average of daily closing prices from the exposure/correction date through the benchmark date. The benchmark date itself depends on whether cumulative turnover of freely tradable shares reaches 100% within this period: if achieved within 10 trading days, the 10th day is the benchmark date; if not reached within 30 trading days, the 30th day serves as the benchmark date. This figure cannot be determined on the day the case is filed. Selling changes only the calculation formula—not your right to claim. Shares purchased within the window retain their eligibility for compensation even if later sold. Conversely, holding shares does *not* guarantee additional compensation: the benchmark price may be higher or lower than the price at which you could have sold them at the time. Moreover, the calculated difference must still be adjusted downward to exclude losses attributable to market risk, industry-wide changes, or other corporate operational events unrelated to the misrepresentation. The loss amount shown in your account is *not* the final compensation amount determined by the court. Purchases made after case filing generally do *not* qualify; waiting for administrative penalties does *not* pause the statute of limitations. Article 12 explicitly excludes purchases made after the exposure or correction date from establishing transaction causation. Buying more shares upon seeing the case-filing announcement—hoping to increase the claim base—typically renders those newly acquired shares ineligible. Such ‘top-up’ purchases alter your average holding cost, but not the scope of compensable claims. On the other side lies the statute of limitations. Article 32 states that courts shall support plaintiffs who assert that the limitation period begins running from the exposure or correction date—whichever occurs earlier. The period is three years, per Article 188 of the Civil Code. The median duration across 313 cases is 190 days—well short of three years. Some investigations take longer; others shift the starting date to the date of the administrative penalty decision. That decision may come long after the exposure date. Per Article 2 of Judicial Interpretation [2022] No. 2, courts may not dismiss a case solely because no administrative penalty has yet been imposed. Waiting for the penalty decision helps clarify the factual basis and precise implementation date—but one must not let the three-year limitation clock expire while waiting. In the absence of a penalty decision, courts still assess whether the misrepresentation was ‘material’ and whether losses were caused by it—based on evidence. Case acceptance does *not* guarantee eventual compensation. What to verify What is determinable on the filing date Conclusions to avoid drawing prematurely Current stage of investigation Administrative investigation has just begun Cannot infer whether compensation will be awarded Exposure date Filing date is a presumptive exposure date Earlier media reports or company corrections may move the exposure date forward

340 investors jointly filed a claim and received judicial support. How can individual investors participate in such securities fraud litigation?

The reason why 340 plaintiffs in the Blue Shield Development case were collectively supported lies precisely in the fact that each plaintiff’s trading records satisfied the required time-window criteria. Determining the applicable time window must be grounded in either the regulatory penalty decision or the court’s formal finding of fraudulent misrepresentation. Investors conducting self-assessment should pay attention to three key points: First, shares purchased *before* the implementation date fall outside the scope of eligible claims. Second, investors who purchased shares *after* the exposure date generally cannot claim compensation—because the misrepresentation had already become public, and subsequent purchases are presumed *not* to have been misled by it. Third, where multiple instances of misrepresentation exist—as in the Zhongyida case (stock code 600610), involving two separate periods—each instance requires its own distinct implementation and exposure dates; calculations must not be conflated. For investors uncertain whether they meet the criteria, we recommend first retrieving the complete trading history from your securities account, then performing a preliminary match against the time windows specified in publicly available penalty decisions or court announcements. III. Efficiency and Limits of Mass Claims The efficiency advantages of mass claims have been validated across multiple cases. Beyond the Blue Shield Development case—with 340 plaintiffs receiving support—the Shanghai Financial Court ruled in the Longyu Shares case (603003) to compensate multiple investors for nearly one million RMB in losses; the Kangmei Pharmaceutical case (600518) covered tens of thousands of investors via the special representative litigation mechanism. These cases collectively demonstrate that China’s judiciary has developed mature adjudication pathways for large-scale securities disputes. However, procedural efficiency does *not* guarantee uniform outcomes. Each case still requires independent judicial determination of causation between the misrepresentation and investor losses. Courts deduct losses attributable to systemic risks and also examine whether investors engaged in irrational trading behavior. Mass claims resolve issues of procedural consolidation—not the substantive evidentiary standards applied to individual cases. In terms of time cost, mass cases typically proceed through first-instance proceedings; if defendants appeal, the case proceeds to second-instance review. For example, both the Century Star Source case (000005) and the Jiajia Shares case (002191) saw appellate rulings by provincial-level high people’s courts upholding the original judgments. Investors should maintain realistic expectations regarding trial duration and avoid inferring the timeline of their own case based on isolated examples. IV. Four Most Frequently Asked Questions by Investors Q: My loss amounts to only several thousand RMB—is it still worthwhile to join the claim? A: Yes, it is worthwhile. In mass claims, litigation fees are levied proportionally to the claimed amount and borne by the defendant upon victory—so investors’ actual out-of-pocket costs remain limited. Losses of several thousand RMB are calculated using the same uniform standard as larger claims and are *not* treated differently due to their smaller size. Q: Can shares purchased *after* the exposure date still qualify for compensation? A: Generally, no. After the exposure date, the misrepresentation is deemed public knowledge; purchases thereafter are presumed *not* to have been misled—and thus fall outside the compensable window. However, where multiple misrepresentation periods exist, each must be assessed separately. Q: The company has already been delisted—can I still file a claim? A: Yes. In the Dinglong Culture case (formerly stock code 002502), the company was delisted during trial proceedings, yet plaintiffs still won first-instance judgment.

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