Research on the Special Representative Litigation System for Securities Disputes

【Answer 1】 1. Establishment of China’s Securities Representative Litigation System The representative litigation system is a major highlight of the newly amended Securities Law, representing both a revival and breakthrough of the representative litigation mechanism stipulated under the Civil Procedure Law. In 1991, Articles 53 and 54 of China’s Civil Procedure Law introduced specific provisions on representative litigation for mass disputes involving numerous parties. However, due to the absence of detailed implementation rules and immaturity of judicial conditions, this system remained dormant in judicial practice—including in securities-related civil litigation—for an extended period. The 2003 ‘Provisions on Several Issues Concerning Civil Compensation for False Statements’ (hereinafter the ‘False Statement Provisions’) stated in Article 12: ‘Plaintiffs in securities civil compensation cases may choose to file individual lawsuits or joint lawsuits.’ While this provision did not explicitly restrict ‘joint lawsuits’ to representative litigation with a determinable number of plaintiffs at the time of filing, it also failed to expressly liberalize procedural forms. As a result, individual lawsuits by investors remained predominant in securities civil litigation. Representative litigation with an indeterminate number of plaintiffs performed extremely poorly in securities dispute practice. Since 2019, the representative litigation system has gradually revived in the securities sector. In January 2019, the Shanghai Financial Court issued the ‘Regulations of the Shanghai Financial Court on the Model Judgment Mechanism for Securities Disputes,’ introducing this litigation mechanism. Its core lies in selecting representative cases for priority trial and judgment, thereby leveraging the guiding effect of model judgments to encourage parties in parallel cases to resolve disputes through mediation or expedited proceedings. In June 2019, the Supreme People’s Court issued the ‘Several Opinions on Providing Judicial Safeguards for the Establishment of the Sci-Tech Innovation Board and the Pilot Registration-Based IPO System,’ proposing to improve China’s securities civil litigation mechanisms in line with national conditions and reduce investors’ litigation costs. It emphasized fully utilizing the existing representative litigation system: where numerous investors jointly file a civil lawsuit, they may elect a representative; and the securities investor protection agency established by the State Council’s securities regulatory authority may file suit in its own name or accept mandates from investors to appoint staff members or retain litigation agents to participate in case hearings—courts may designate such agency or its represented party as the representative. In November 2019, the Supreme People’s Court’s ‘Minutes of the National Court Conference on Civil and Commercial Trial Work’ (the ‘Nine-Minute Minutes’) specifically encouraged qualified local courts to pilot representative litigation in selected cases, and clearly regulated procedures concerning case registration, case screening and procedural determination, and selection of representatives. Article 83 states: ‘Where a state-established investor protection agency files suit in its own name or accepts mandates from investors to appoint staff or retain litigation agents to participate in case hearings, the people’s court may consult with the agency or its represented party to designate them as the representative,’ heralding the imminent arrival of China’s distinctive securities class action. The new Securities Law formally codified the representative litigation system for securities disputes. Article 95 of the Securities Law provides: When investors initiate civil compensation lawsuits for false statements or other securities violations, and where claims are of the same nature and one party comprises numerous individuals, they may lawfully elect representatives to conduct litigation. For lawsuits filed under the preceding paragraph, where other numerous investors may have identical claims, the people’s court may issue a public notice describing the case and notifying investors to register with the court within a specified period. Judgments and rulings rendered by the court shall bind all registered investors. An investor protection agency, upon mandate from fifty or more investors, may act as representative in litigation and register, on behalf of rights-holders confirmed by the securities depository and clearing institution, those rights-holders with the court pursuant to the preceding paragraph—except where investors explicitly indicate unwillingness to join the litigation. 2. Concept of the Special Representative Litigation System for Securities Disputes 3. Meaning of Special Representative Litigation for Securities Disputes Special representative litigation is a litigation system whereby an investor protection agency, acting as a special representative after receiving mandates from fifty or more investors, initiates securities damage compensation litigation under the principle of ‘opt-in by default, opt-out by express declaration.’ Although the typical significance of Paragraph 3 of Article 95 of the 2020 Securities Law lies in introducing the U.S.-style ‘opt-in by default’ rule for securities class actions, the specially designed ‘special representative litigation’ bears strong Chinese characteristics. First, the investor protection agency is the sole entity authorized to initiate special representative litigation. Unlike ordinary investors, non-profit organizations possess professional advantages; their retained public-interest lawyers can effectively deliver specialized services to investors while avoiding lawyers’ opportunistic tendencies. Under this requirement, neither lawyers nor ordinary investors themselves may initiate special representative litigation. Second, the litigation procedure follows the ‘opt-in by default, opt-out by express declaration’ principle. Special representative litigation integrates China’s actual securities market conditions with the U.S. ‘opt-in by default’ securities class action system, breaking through relevant provisions of traditional mechanisms for resolving securities mass disputes—particularly the representative litigation system—and is hailed as ‘China’s version of securities class action.’ Compared with traditional representative litigation under China’s Civil Procedure Law—which requires plaintiffs with indeterminate numbers to register affirmatively—under special representative litigation, injured investors confirmed by the securities depository and clearing institution automatically become plaintiffs without needing to register, unless they expressly decline participation. Third, special representative litigation explicitly requires that the investor protection agency must receive mandates from no fewer than fifty investors. Procedurally, once ten or more rights-holders file suit, the court decides to adopt the indeterminate-number representative litigation procedure and issues a public notice. During the court’s thirty-day notice period, the investor protection agency must obtain special authorization from fifty or more rights-holders to enter the special representative litigation procedure. Unlike representative litigation under China’s traditional Civil Procedure Law, the special representative’s authority in special representative litigation constitutes special authorization granted by the parties—not general authorization. 4. Similarities and Differences Between Special and Ordinary Representative Litigation

The New Securities Law Has Been in Effect for Nearly Nine Months: A New Framework for Investor Protection Is Becoming Increasingly Clear

【Answer 2】 As the fundamental law governing capital markets, the new Securities Law places prominent emphasis on protecting investors’ rights and interests—especially those of small and medium-sized investors—and establishes a dedicated chapter on ‘Investor Protection’ in Chapter VI. As the new Securities Law approaches its ninth month of implementation, the framework for investor protection has become increasingly clear. Dong Zhongyun, Chief Economist at AVIC Securities, told reporters from Securities Daily that, previously, due to imperfections in the legal system, securities investors seeking to safeguard their rights through litigation often confronted numerous difficulties—including complex litigation procedures, lengthy timelines, and high litigation costs—resulting in generally poor outcomes for securities litigation. Paragraph 3 of Article 95 of the new Securities Law regarding representative litigation is widely regarded as one of the law’s greatest highlights. According to the Supreme People’s Court’s judicial interpretation of this provision, litigation in which an investor protection agency participates as representative pursuant to Paragraph 3 of Article 95 of the new Securities Law qualifies as ‘special representative litigation,’ distinguished by two key features: first, it breaks from the traditional academic understanding that ‘a representative must simultaneously be a party to the case,’ establishing instead that an investor protection agency may acquire representative status based on mandates from parties; second, it departs from the Civil Procedure Law’s requirement of ‘opt-in by express declaration’ for joining litigation, instituting instead a system whereby the investor protection agency registers rights-holders on their behalf, and investors join the litigation ‘by default’ unless they expressly opt out. ‘These breakthrough innovations at the legal-system level will significantly reduce investors’ litigation costs, enabling more investors—especially small and medium-sized ones—to realize rights protection through litigation, thereby deterring unlawful conduct in the securities sector and further enhancing China’s level of securities investor protection, thus consolidating a fair, impartial, and transparent securities market order,’ Dong Zhongyun added. Liu Xiangdong, Deputy Director of the Department of Economic Research at the China Center for International Economic Exchanges, told Securities Daily reporters that the representative litigation system stipulated in Article 95 of the dedicated ‘Investor Protection’ chapter establishes that an investor protection agency, upon mandate from fifty or more investors, may serve as litigation representative—signifying another professionalized step forward for China’s capital market in protecting small and medium-sized investors. Specifically, it enables professional institutions such as the China Securities Investor Services Center (CISISC) or similar entities to represent investors in litigation, thereby opening a path for small and medium-sized investors to entrust professional agencies with rights protection. Huang Yong, Deputy General Manager of the China Securities Small and Medium-sized Investors Service Center Co., Ltd., stated at the Third Small and Medium-sized Investors Service Forum that CISISC will introduce new methods and measures for investor protection to foster a favorable environment for capital market development.

Chemours Securities Class Action Lead Plaintiff Deadline Set for December 7, 2026

Oct 14, 2026

Levi & Korsinsky LLP announced a December 7, 2026, lead plaintiff deadline for a securities class action against The Chemours Company. The lawsuit claims overstated Opteon refrigerant demand and channel overstocking caused a significant stock price drop after a guidance cut.

Chemours Company Securities Class Action Lead Plaintiff Deadline Set for December 7, 2026

PR Newswire

Morningstar

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Chemours Faces Securities Lawsuit Over Disclosures and Guidance

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Chemours Company Faces Class Action Lawsuit Alleging Investor Harm

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Class Action Lawsuit Filed Against Chemours for Misleading Investors on Product Demand and Financial Guidance.