The Zeda Yisheng case became the second securities class action for A shares
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The reporter learned from the China Securities Small and Medium Investor Service Center (hereinafter referred to as the “Investor Service Center”) that following the Kangmei Pharmaceutical case, the second special representative lawsuit in the A-share market, the Zeda Yisheng case, has been successfully filed by the “ordinary representative” ” into “Special Representative Proceedings”. “Zeda Yisheng is one of the first batch of Sci-Tech Innovation Board companies to be administratively punished for fraudulent issuance. On the occasion of the full implementation of the stock issuance registration system, the punishment of this case and the application of special representative litigation are of great significance to the market.” Guoco Huang Jiangdong, senior consultant of Lawyer (Shanghai) Firm, arbitrator of Shanghai Arbitration Commission, and member of the Securities Litigation Case Evaluation Expert Committee of China Securities Small and Medium Investor Service Center, said.
The conversion of the second single special representative lawsuit is completed
The relevant person in charge of the Investor Service Center introduced that the special representative lawsuit has the characteristics of “implicit participation and express withdrawal”. After the initiation of the special representative lawsuit, the investors in the list of obligees confirmed by the securities registration and settlement institution will become the plaintiffs of the case and share the results of the lawsuit, except for those who expressly express to the court in writing that they will not participate in the lawsuit. equal rights.
“The amount of compensation that investors can actually get will depend on the defendant’s performance of effective judgments or mediation and court enforcement, and there is a risk that they will not be able to obtain compensation. The Investor Service Center will list the defendants as much as possible, and follow-up according to the actual situation. Consider applying for enforcement, and strive for investors to obtain compensation in accordance with the law.” The person in charge emphasized.
Previously, on April 28, the Shanghai Financial Court accepted the case of 12 investors jointly suing Zeda Yisheng, its executives, and intermediaries (brokers, accounting firms, and law firms) for a securities misrepresentation liability dispute. The China Securities Regulatory Commission’s “Administrative Punishment Decision” shows that Zeda Yisheng was suspected of falsely increasing operating income by 565 million yuan and profit of 296 million yuan before and after listing, and failed to truthfully disclose related transactions and equity holdings before listing. Failure to truthfully disclose connected transactions and falsely increase construction in progress. On July 7, 2023, Zeda Yisheng was delisted and delisted.
On July 19, the Shanghai Financial Court issued the “Announcement on the Registration of Litigation Rights of Representatives in the Zeda Yisheng Case”. On the same day, the Investor Service Center publicly solicited more than 50 (including 50) investors for authorization to apply to participate in the ordinary representative litigation of the Zeda Yisheng case, and to apply for conversion to the special representative litigation. Judging from the solicitation results, the Investor Service Center received a total of 233 applications submitted by investors, including 226 qualified investors, accounting for 97%. Compared with the first class action “Kangmei Pharmaceutical Case”, the solicitation period for this case was shortened from 12 days to 7 days, but the proportion of qualified investors participating in the solicitation was 6 times that of the first case.
Reduce rights protection costs and litigation risks
“The special representative lawsuit initiated by the investor protection agency provides a more convenient and low-cost channel for investors to protect their rights.” Chief partner and lawyer of Shanghai Shangzheng Hengtai Law Firm, China Securities Small and Medium Investor Service Center Securities Cheng Xiaoming, member of the Litigation Case Evaluation Expert Committee, said that after the case enters the special representative litigation procedure, it will play a key role in protecting the rights and interests of small and medium-sized investors who were victims of the Zeda Yisheng case.
Cheng Xiaoming said that due to the provisions that “if the investor clearly expresses his unwillingness to participate in the lawsuit, he shall declare his withdrawal to the people’s court within 15 days after the expiration of the announcement period. If he does not declare his withdrawal, he shall be deemed to have agreed to participate in the representative lawsuit.” It is extremely convenient for investors to expressly join and perform cumbersome rights registration. Moreover, the practice of the investor protection agency registering in the list of plaintiffs in representative litigation based on the list of obligees directly obtained from the securities registration and settlement agency by the people’s court also eases the work of protecting investors’ rights.
“Because it is stipulated that the special representative litigation case does not need to pay the case acceptance fee in advance, even if the lawsuit is lost or partially lost, the plaintiff can still apply for a reduction or exemption of the litigation fee, thus greatly reducing the cost of rights protection for investors.” Cheng Xiaoming further stated .
Huang Jiangdong emphasized that protecting investors is one of the important purposes of securities regulation. All parties in the market fully implement the concept of protecting investors. In addition to pursuing the responsibility of offenders, they give priority to ensuring the adequacy and effectiveness of compensation for investors, which will help boost investors’ confidence in the securities market and eliminate violations of laws and regulations. Negative impact of the event on market reputation.
Effectively deter market violations
“‘Building a system, non-intervention, and zero tolerance’ is an important guideline for the development of the capital market, and the ‘zero tolerance’ of securities violations and crimes is an important measure to protect the ‘non-intervention’. The person in charge of the relevant department of the China Securities Regulatory Commission in Ze The Da Yisheng case also made it clear in the answer to the reporter’s question that it will resolutely implement the requirements of the Party Central Committee and the State Council on the “zero tolerance” of illegal and criminal acts in the capital market, and promote the implementation of administrative, civil, and criminal punishments for illegal and criminal acts such as fraudulent issuance to form a strong deterrent Huang Jiangdong believes that while the registration system opens the water for companies to issue and go public, cracking down on fraudulent issuance and financial fraud is an important guarantee for maintaining the clarity of the “pool water” and purifying the market ecology. Properly handling the first batch of fraudulent issuance cases under the pilot registration system is more important for the smooth start of the comprehensive registration system.
It is worth noting that as a “gatekeeper” sponsor, Dongxing Securities was also investigated by the China Securities Regulatory Commission. According to the agency’s previous announcement, it is the sponsor, lead underwriter, and continuous supervisory agency of Zeda Yisheng’s initial public offering and listing on the Science and Technology Innovation Board. Dongxing Securities disclosed in the announcement of major litigation progress that the defendants included Dongxing Securities in the “Announcement on the Registration of Litigation Rights of Representatives in the Zeda Yisheng Case of Shanghai Financial Court” issued by the Shanghai Financial Court.
“The lawsuit by the special representative puts forward new requirements for the securities regulatory authority, the people’s court, and the insurance policy institution.” Huang Jiangdong believes that for the securities regulatory authority, the determination of responsibility is an important basis for determining the scope of defendants in civil litigation, so it should be more In order to accurately identify the directly responsible person; for the people’s court, it should accurately divide the responsibility of the responsible person, and should accurately determine the scope of responsibility of the person based on factors such as the fault of the relevant person and the causative force of the behavior on the damage result; As far as institutions are concerned, they should choose cases carefully, focusing on cases with clear illegal facts, many damaged investors involved, typical and significant cases with demonstration significance.
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