DeHeng Successfully Represented A Listed Company
in a Demonstration Case about Misrepresentation
2020-04-20
Recently, Shanghai Financial Court issued a first-instance verdict on a demonstration case about disputes over some listed company's misrepresentation of securities. As the defendant's attorney, DeHeng provided the listed company with whole-process legal services, greatly reduced the amount of compensation, and won full recognition from the client.
This misrepresentation case had the characteristics of highly professional, with high social attention, a large number of investor plaintiffs demanding an astronomic amount of claims, and complicated loss calculation and so on. The case lasted for more than one year. DeHeng lawyers argued that: (1) The disclosure date should be the date when the listed company received the Notice of Case Investigation from China Securities Regulatory Commission (CSRC) rather than when it received the Prior Notice of Administrative Punishment as proposed by the plaintiffs; (2) The average bid price should be calculated by the moving weighted average method rather than the ordinary weighted average method proposed by the plaintiffs; (3) If the court finds the listed company liable for compensation, it should deduct the losses caused by systematic risks in the securities market and non-systematic risks such as the operation of the listed company when calculating the compensation amount.
The court supported DeHeng's main defense, and determined to use the date when the listed company received the Notice of Case Investigation from the CSRC as the disclosure date, calculate the average bid price of the plaintiffs by the moving weighted average method, and consider the losses caused by systemic risks of the securities market and non-system risks such as the operation of the listed company in loss check and ratification. As a result, the total compensation amount was greatly reduced. Meanwhile, as a demonstration case, it introduced the specialized loss check and ratification agency, and clarified the determination of the disclosure date, the calculation method for the average bid price, and the calculation method and deduction factors of the plaintiff's loss in cases of listed company's misrepresentation of securities, which made a breakthrough to the previous precedents.
The DeHeng team, with partners Wang Junqi and Wang Xiaoqian as the trial lawyers and with support from lawyers Jiang Tao, Wang Yaran, Yan Xiaodan, Sun Hong and Gu Ting, provided whole-process legal services to the client. Following the revision of the Securities Law, Shanghai Financial Court issued a document specifying the representative actions mechanism for securities disputes. In the future, the securities dispute resolution mechanism will be further improved, and investors will find it easier to defend their legitimate rights, requiring listed companies to strengthen abilities to resolve disputes. In response, DeHeng will continue to work on securities disputes and provide more professional and detailed legal services to help listed companies cope with disputes.
