Civil Liability System in Securities Market
Introduction
The Chinese securities market is the stock market that hosts the trading of Chinese securities such as shares, bonds, ETFs, warrants, and futures contracts. The securities market is considered to be the primary provider of capital for Chinas economic growth and development, with the two largest stock exchanges in the country located in Shanghai and Shenzhen.
Investment activities and transactions in the securities market may involve substantial risk factors, and investors are uncertain of the potential gains or losses related to the abovementioned activities. As a result, the Chinese government has put in place certain regulations and procedures that help in protecting the investors’ rights and interests. One of the most important measures employed by the Chinese government in this regard is a civil liability system that helps investors to seek compensation for losses incurred in connection with investments and transactions in the securities market.
The civil liability system for investments and transactions in the securities market primarily comprises written law, such as the “Securities Law of China” and the “Administrative Measures for Tender Offers of Listed Companies”, as well as various regulations, guidelines, and judicial interpretations issued by the regulatory authorities. The main objective of the civil liability system is to protect investor rights and interests, create an improved legal and regulatory framework to guide secure transactions and investments, and to provide legal remedies for investors in case of financial losses.
General Principles
The civil liability system for investments and transactions in the securities market is based on several general principles. Firstly, the parties in the transactions must comply with all applicable laws, rules, and regulations. Furthermore, the parties must adopt fair, reasonable and responsible practices while conducting their investments and transactions in the securities market. The parties must also bear the legal liability in case of any loss caused by its own conduct or failure to comply with the aforementioned obligations.
Secondly, investors must strictly abide by the “Securities Law of China” including its related regulations, laws, and guidelines. It is the responsibility of the investors to ensure that their investment activities and intentions are in full compliance with the applicable laws and regulations.
Thirdly, the legal remedies offered by the civil liability system are applicable to investors who have suffered losses caused by the issuer, the securities exchange, and the custodian. In cases where the investors incur losses arising from market manipulation, unauthorized trading, misrepresentation of financial information, and insider trading, the relevant regulatory authority may bring claims seeking compensation from the responsible entity.
Finally, the civil responsibility system provides investors with a variety of legal remedies for securities transaction-related losses. The remedies generally include restitution, damages for breach of contract, compensation for subsequent losses caused by the violation of the legal obligations of the responsible entity, etc.
Liability provisions
The civil liability system for investments and transactions in the securities market is composed of the relevant laws and regulations, as well as various guidelines and judicial interpretations issued by the regulatory authorities. According to the “Securities Law of China” and the “Administrative Measures for Tender Offers of Listed Companies”, potential claimants can bring claims against the responsible entity for losses caused by negligence, intentional violations, and other wrongful activities.
In particular, the “Securities Law of China” and the “Administrative Measures for Tender Offers of Listed Companies” provide investors with the right to demand compensation from the responsible entity in case of losses caused by negligence, intentional violations, market manipulation, unauthorized trading, insider trading and other wrongful activities. Additionally, the “Administrative Measures for Tender Offers of Listed Companies” also provides for the issuance of injunction orders to maintain or restore the status quo of the investor or related securities transactions.
Furthermore, the civil liability system also provides investors with the opportunity to take civil legal action to clarify and protect their rights in cases of financial loss, including seeking remedies such as restitution of losses, damages for breach of contract, and compensation for subsequent losses caused by the violation of the legal obligations of the responsible entity, etc.
Conclusion
At present, the civil liability system for investments and transactions in the Chinese securities market is considered to be generally effective in ensuring investors’ rights and interests. Nevertheless, investors should be aware that investing in the securities market may involve substantial risk factors, and they are unclear of the potential gains or losses due to the lack of knowledge on such transactions and investments. Therefore, it is still recommended that investors should understand more about the legal principles and rules of the civil liability system and take precautionary measures, including sound investment decisions, monitoring of investment environment and trend, and understanding the detail of the securities listed.
