1. Question: Recently, the Guangzhou Intermediate People's Court made a first-instance judgment on the lawsuit of Kangmei Pharmaceutical's special representative.
As a regulatory agency, how do you view the outcome of this lawsuit?
Answer: The Kangmei Pharmaceutical Securities Dispute is the first special representative litigation case in my country.
Kangmei Pharmaceutical Company has three consecutive years of financial fraud. The amount involved is huge, the duration is long, the nature is particularly serious, the social impact is bad, and the legitimate rights and interests of investors are seriously damaged.
As an investor protection agency, the CSI Small and Medium-sized Investor Service Center responds to market calls, accepts investor entrustment in accordance with the law, and participates in Kangmei Pharmaceutical representative litigation as a representative to fight for the maximum rights and interests of investors.
The court’s first-instance judgment in accordance with the law is of great significance as a demonstration. It is a powerful measure to implement the new "Securities Law" and the "Opinions on Strictly Cracking down on Illegal Securities Activities in accordance with the Law" by the Central Office and the State Council. It is also a pioneering symbol in the history of the capital market. Sexual cases are milestones in promoting the deepening reform and healthy development of my country’s capital market and effectively safeguarding the legitimate rights and interests of investors.
The China Securities Regulatory Commission expressed support for this and will supervise investor protection agencies in accordance with the law and cooperate with the people's courts to do follow-up related work.
In the next step, the China Securities Regulatory Commission will, on the basis of comprehensively summarizing the experience of the first case, promote the improvement of the representative litigation system, support investor protection agencies to further optimize the case evaluation, decision-making, and implementation procedures, and promote the normalization of special representative litigation in accordance with the law.
2. Question: How did the Kangmei Pharmaceuticals case achieve the goal of "punishing the chief evil"?
Answer: The relevant parties have resolutely implemented the spirit and requirements of the Party Central Committee and the State Council on "zero tolerance" for illegal and criminal behaviors in the capital market, and adopted a variety of means to build a three-dimensional civil, administrative, and criminal accountability system, so that Kangmei Pharmaceutical Co., Ltd. Behind the scenes of the case, those who actually manipulated the listed company paid a heavy price for the evil ones and achieved the goal of "punishing the first evil." Create a good market ecology.
First, the huge amount of civil compensation makes the "first evil" bear due responsibility.
In the Kangmei Pharmaceutical Special Representative's litigation, the court comprehensively considered the basic facts of the case, the subjective fault of the defendant in the misrepresentation and other factors, and ruled that Ma Xingtian and Qiu Xiwei and other four former senior executives organized and planned to implement financial fraud, which was deliberate Acts, bear 100% of joint and several liability (2.459 billion yuan) in accordance with the law, which is conducive to strengthening the punishment and deterrence of illegal perpetrators in the capital market.
The second is that the listed company actively seeks to collect funds from the original major shareholders and actual controllers.
Under the coordinated efforts of Guangdong Province and all parties, on October 30, Kangmei Pharmaceutical announced that the Jieyang Intermediate People's Court enforced the company’s controlling shareholder’s related party assets, and the total proceeds of 1.641 billion yuan have been paid to the company’s manager’s account. , Used to offset the use of company funds by related parties.
By recovering the funds occupied by the original major shareholders and actual controllers, it is beneficial to better protect the legitimate rights and interests of the majority of small and medium-sized investors, and also allows listed companies to go back to the battlefield.
Third, the judicial organs simultaneously pursue criminal liabilities for the original major shareholders and actual controllers.
After the investigation was completed, the Foshan City Procuratorate filed a public prosecution with the Foshan Intermediate Court on October 27, accusing Ma Xingtian of criminal securities crimes.
The Foshan Intermediate People's Court opened a case on the same day to accept the relevant case, and combined with the previous bribery case of Kangmei Pharmaceutical and Ma Xingtian, to effectively investigate the criminal responsibility of the relevant perpetrator.
3. Question: What is a class action or special representative action with Chinese characteristics, and what is the difference between an ordinary representative action?
Answer: In accordance with the relevant provisions of the new Securities Law and the Supreme People’s Court on Several Issues Concerning Representative Litigation in Securities Disputes (Fa Shi [2020] No. 5), the People’s Court initiates ordinary representative litigation and issues a notice of rights registration. During the announcement period, the investor protection agency is specially authorized by more than 50 investors to participate in the special representative litigation as a representative in accordance with the law.
The difference between it and ordinary representative litigation is:
One is that the litigation representatives are different.
The representative of ordinary representative litigation is the investor, and the representative of special representative litigation is the investor protection agency.
The second is that the principle of participation in litigation is different.
Compared with the "explicit addition" of ordinary representative litigation, the special representative's litigation is "implicit access", which can expand the scope of investor protection and better exert a deterrent effect on illegal activities.
The third is the different effects of litigation.
Compared with ordinary representative litigation, special representative litigation can resolve disputes at one time, but it also means that the responsible person will face huge compensation in a short period of time, which increases the risk of bankruptcy and increases the uncertainty of obtaining compensation.
Both litigation methods have their own advantages and disadvantages. Either method is an important measure to implement the new "Securities Law" to protect investors and deter violators.
Which litigation method is more beneficial in a specific case requires a specific analysis based on the circumstances of the case.