China Offers Stronger Legal Support to Crackdown on Securities Fraud

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Last updated at: (Beijing Time) Thursday, January 09, 2003

China Offers Stronger Legal Support to Crackdown on Securities Fraud

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Three months after declaring that courts would not hear civil disputes relating to stock trading fraud, China's Supreme People's Court (SPC) said in January last year that such cases would be accepted.

And on Thursday, the SPC issued regulations in 27 articles dealing with stock trading fraud caused by false messages released by listed companies, while nearly 900 such cases are already piled high on the desks of Chinese judges nationwide.

Of the 900 lawsuits, only two had been settled through court mediation, and the rest were pending, said Li Guoguang, SPC vice-president, at a press conference on the new regulations. All those lawsuits involve no more than 10 listed companies.

The compensation to a plaintiff, if the defendant is found to have committed a fraud, will include his losses from the transactions and other fees incurred, for instance, commission and tax, the regulations say.

However, courts should encourage parties involved to resolve their disputes through mediation and negotiation, which was more economical for both sides, said the vice-president.

But according to the regulations, litigants can take their case to court only after the China Securities Regulatory Commission or its branches, government bodies or the courts have decided a fraud has been committed. And cases handled are limited to the dissemination of false and misleading information by listed companies, stock exchanges and other institutions, which caused investors to incur losses.

The regulations were especially made to protect the interests of individual investors, because they were usually at a disadvantage when hit by stock trading fraud, and their morale and confidence was key to the development of the country's securities market, Li said.

Since China's stock market re-opened 12 years ago, the country had 1,200 listed companies and 68 million registered investors, and the stock market was worth 4.3 trillion yuan by October last year.

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