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

【Answer 1】 I. What Is Stock Investment Rights Protection? Stock investment rights protection generally refers to civil redress actions whereby investors, having suffered losses due to unlawful acts committed by listed companies—such as fraudulent misrepresentation, fraudulent issuance, insider trading, or market manipulation—lawfully claim compensation from responsible parties. Currently, the most common and institutionally supported type is disputes concerning civil liability for securities fraudulent misrepresentation. Common forms of misrepresentation include: fabrication of financial statements; failure to disclose material events; misleading statements; and grossly inaccurate profit forecasts. II. Three Conditions That Must All Be Satisfied to File a Claim III. Four Key Time Points IV. Scope of Compensable Losses Pursuant to Article 25 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Civil Compensation Cases Arising from Fraudulent Misrepresentation in the Securities Market, compensation is limited to investors’ actual losses, including: 1. Losses arising from the difference in investment value (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. Commissions and stamp duties corresponding to the above-mentioned investment value difference; 3. Interest losses on the amounts specified above (calculated at the prevailing interest rate for demand deposits with commercial banks). V. Available Remedies (Ordered from Lowest-Cost to Highest-Cost) VI. Statute of Limitations VII. Documents Required for Filing a Lawsuit 1. Identity documents: photocopy of ID card (for natural persons) or business license (for institutional investors); 2. Evidence of fraudulent misrepresentation: administrative penalty decision issued by the China Securities Regulatory Commission (CSRC), company announcements, notices of investigation initiation, etc. (if available); 3. Transaction records: securities account information and account statements (stamped with the official seal of the securities firm’s branch office), specifying dates, quantities, and prices of purchases and sales;

Law Firms Specializing in Economic Disputes Handling Financial Investment Disputes: Practical Guidance on Corporate Rights Protection and Analysis of Criminal-Civil Overlap

【Answer 2】 I. Why Financial Investment Disputes Require Specialized Handling Compared with ordinary civil and commercial disputes, financial investment disputes exhibit several distinctive features. First, legal relationships are highly complex. Financial investments often involve multi-layered, nested transaction structures—including asset management plans, trust conduits, limited partnership funds, and nominee shareholding arrangements—whereby rights and obligations among various parties become deeply intertwined; indeed, characterizing the underlying legal relationship itself may become a central point of contention. Second, regulatory rules are dense and multifaceted. The financial sector is governed by numerous laws—including the Securities Law, the Securities Investment Fund Law, the Trust Law, and the Banking Regulatory Law—as well as a vast body of departmental regulations and normative documents. Frequent interaction exists between civil adjudication and regulatory requirements. Third, criminal-civil overlap is widespread. In financial investment disputes, unlawful conduct may simultaneously trigger civil liability, administrative liability, and even criminal liability. For example, illegal fundraising by private fund managers, disclosure violations by listed companies, or unlawful lending by financial institutions may all give rise to intertwined criminal and civil proceedings. Fourth, evidence is highly specialized. Evidence in financial transactions commonly includes product contracts, risk disclosure statements, fund flow records, trade logs, system audit trails, and regulatory letters—requiring lawyers to possess both deep financial expertise and rigorous legal analytical capabilities. Given these features, when enterprises face financial investment disputes, retaining a law firm specializing in economic disputes—and with substantial experience in both financial practice and criminal defense—often enables them to obtain more comprehensive legal support. II. Major Types of Financial Investment Disputes From a practical perspective, enterprises commonly encounter the following types of financial investment disputes: 1. Asset Management Product Disputes: Enterprises, acting as qualified investors, subscribe to trust plans, asset management products, or private equity funds, and subsequently encounter disputes arising from failure to redeem upon maturity, breach of fiduciary duty by managers, or noncompliance with contractual terms governing product operations. The crux of such disputes lies in whether the manager breached its fiduciary obligations and whether a causal link exists between such breach and the investor’s losses. 2. Securities Fraudulent Misrepresentation Liability Disputes: Enterprises suffering investment losses due to fraudulent misrepresentation by listed companies—including false statements, misleading statements, or material omissions—may lawfully file lawsuits seeking civil compensation for securities fraudulent misrepresentation. The Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Civil Compensation Cases Arising from Fraudulent Misrepresentation in the Securities Market, effective since 2022, abolished the prior administrative penalty requirement, thereby lowering the threshold for investor redress. 3. Financial Loan Contract Disputes: Disputes arise between enterprises (as borrowers or guarantors) and financial institutions—including banks, trust companies, and microfinance companies—regarding performance of loan agreements, covering issues such as interest calculation, validity of guarantees, premature loan acceleration, and debt restructuring. 4. Entrusted Wealth Management Contract Disputes: Enterprises entrust funds to financial institutions or asset management companies for investment management, and disputes emerge over loss allocation, profit distribution, or breaches by the entrusted party. A pivotal issue in such cases is the characterization of the contractual relationship—e.g., whether it constitutes entrusted wealth management, a loan arrangement, or a guaranteed-return (or principal-protected) investment versus a risk-bearing investment. 5. Bill and Letter of Credit Disputes: These include bill recourse disputes, claims for restitution of bill benefits, and letter-of-credit fraud disputes—arising from payment and settlement instruments used in financial transactions.

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