Study Of Securities Class Actions

In recent years,the cases in which the legal rights and interest of medium and small investors are harmed assume continuous rise in our country. However, judicial interpretations prohibit class actiom from using, which makes it difficult for medium and small investors to get judicial remedies. Jurisprudence in our country has little researched on the specifi rules of securities class action.In this paper, through the research and analysis on leglation and practice about securities class action in our country, the author provided Framework of the recommendations on the operating mechanism of securities class action in our country.Besides the introductory remarks, the full text is consisted of seven chapters,and the basic content ia as follow:In the Introduction section, the author firstly stastes the objective of the paper is to provide Legislative Reference on securities class action in our country. In the research status section, the author summaries the research status in the United States, stresses it's positive charterastics.Against that, in our country, related research assumes homogenization tendency, mainly introduces and calls for the introduction of U.S.securities class action, and only a few articles disscuses the Framework of the recommendations on the operating mechanism of securities class action in our country. In terms of the scope of the study, this papermainly discusses on the Rules of procedure in America, Australia, Canada, South Korea and our country,in which the scientific and reasonable operating mechanism is the focus. The research perspective of this paper bases on Function-based classification(due process mechanism, incentives mechanism, constraints mechanism, mechanism ofcompensation and allocation). In terms of the research innovation, there are three aspectsin this paper:studing the operating mechanism of securities class action from the specific procedural rules, which has closed gaps in our country; conducting Re-evaluation of Private Securities Litigation Reform Act of 1995; studing the securities class action in Australia and Canada, which has also closed gaps in our country.The first chapter mainly analyses and discusses on the basic theory of securities class action, including the concept, features,value and function, history evolution, operating mechanism and the theory basis.In this chapter, the author discusses the unique characteristics of securities class action from the aspects of procedure and the legal application after defining the concept of that..Next, the author overviews the history evolution of securities class action in America, Australia, Canada and South Korea. To lay the foundation for the next studing, in the fourth quarter, the author defines the concept of operating mechanism of securities class action, overviewing it.s connotation. In the fifrth quarter, the author analies the unique theory basis:the theory which describes that Modern-type action(or Public Law Litigation) amends the fundmental principles of civil litigation and the fraud-on-the-market theory in the United States.The second chapter mainly carries on the comparison studing on the due process mechanism of securities class action, analysing the applation of opt-out system in securities class action, representatives' conditions and generation process, class lawers'conditions and generation process, as well as the notification system in America, Australia, Canada and South Korea.The main content are:the opt-out right and the right to participate in procedure of class members; the representatives who are 'appointed by judge can Fairly and adequately represent the interest of class members;the class lawers not only can fairly and appropriately conduct lawsuits but also don't own the related stock; As subject, costs and content of notification, they are different in each countre. The conclusion of the comparison studing is that the due process mechanism of securities class action must be perfected in our country, but it mustn't become constraints mechanism.The third chapter mainly carries on the comparison studing on incentives mechanism of securities class action, analysing contingency fee system, incentives and compensation to representatives, incentives in the system of expense of civil litigation and incentives in the system of proof burden in America, Australia, Canada and South Korea. Regarding contingency fee system, lawers are main beneficiaries in America and South Korea, and funders are main beneficiaries in Australia, and lawers mainly benefit from improving the hourly rate dollars. Incentives and compensation system,to representatives has been widely applied in the United States, and now has been prohibited from applying, and the other countries have emerged the viewpoints supporting it. Regarding incentives system in the system of expense of civil litigation, the parties pay their own costs in the United States which helps the plaintiffs in securities class action; there has been the evidences of closer to "America Rules" in Canada; in Australia, there is a advantage that whose cost of civil litigation is charged on per-item basis. Regarding incentives system in the system of proof burden on the second market, America adopts reliance presumption; there is fault presumption in Australia;in Canada, reliance and transaction causality are exempted from proving, and fault presumption is applied; in South Korea, there lies fault presumption.The fourth chapter mainly carries on the comparison studing on restrictions mechanism of securities class action, analysing the restrictions of case scope and class certification, the restrictions of sanctions on the representatives and class lawers, the restrictions of the system of expense of civil litigation and security system for payment of costs in class actions, the restrictions of the system of proof burden in America, Australia, Canada and South Korea. In terms of the case scope and class certification, strict trends is prevalent in the United States and Canada;in South Korea, besides certification process, there lies also the restrictions of action causes, parties qualification, class lawers qualification; In this regard, it is most loose in Australia. Out of consideration on punishment to frivolous and vexatious actions, thers are sanctions on the representatives and class lawers in every country, and South Korea has criminal sanctions. However, these sanctions have been little applied. The restrictions of the system of expense of civil litigation have been little applied yet,.but in Australia, Canada and South Korea, the losing parties must pay the related costs to winning parties. As the restrictions of the system of proof burden, unlike case law, Private Securities Litigation Reform Act of 1995 prescribes that plaintiffs assume all the proof burden; in Australia, plaintiffs assume the proof burden of reliance and transaction causality; in Canada, plaintiffs assume the proof burden of " Good Faith" and " Substantive Merits; in South Korea, plaintiffs assume the proof burden of reliance and causality.The fifth chapter mainly carries on the comparison studing on restrictions mechanism of securities class action, analysing the standard of compensation and calculation ways, settlement process,claims process and allocation process in America, Australia, Canada and South Korea. Regarding the standard of compensatio, though there lies the difference about direct loss and actual loss, the main way in securities class action is estimation.In settlement process, judges own the power of Review and approval, and class members own the right of objection in hearing stage of settlement process. Regarding the claims process,there are three stages in each country including claims notification, apply to compensation and right certification,and whose main problem lies in very low claim rate. The allocation process in each country are similar, whose main link are allocation methods, cost of allocation and management and treatment of residual compensation.The sixth chapter focus on the change of the form of securities class action in our country. By judicial interpretation, the first section firstly analies on the admition to representatives lawsuits in securities class action, then researches on the practical change of the form of securities class action in our country. Regarding the due process mechanism of securities class action in our country, there are the partication right in the procedural and substantive problems, notification ways and subject(courts), but representatives and class lawers'conditions and generation process haven't been provided. The incentives mechanism are mainly consisted of related provisions about litigation costs and related evidence system, and the former contains the provisions about freedom and reduction from litigation costs, and the latter contains direct assertion of causality under certain conditions, and judges'surveying and collecting evidences. Regarding the restrictions mechanism, there are constraints of case scope and pre-program process, the constraints of prohibition from contingency fee and the losing parties'paying of the related costs to winning parties, the constraints of the higher requirements of the evidence materials and qualified parties, the constraints of confirmation scope of causality.The seventh chapter researches on guiding thinking, basic principles and basic content of operating mechanism of securities class action in our country. Regarding due process mechanism, opt-out and opt-in system should coexist,; two times opt-outright, the right to participate in procedure,Appeals right of class members, representatives'and class lawers'conditions and generation,Replacement process, should be provided; the ways of notification should bedecided according to the Investment size. As incentives mechanism, contingency fee system should be Legalized, representatives should be Awarded; the parties should pay their own costs; plaintiff class needn't assume the proof burden of reliance, fault and causality. Regarding constraints mechanism, the Foregoing constraintsfactors should be abolished, and only provide class certification which only contain Prerequisite conditions. As for mechanism ofcompensation and allocation, the cases of first market follow the principle of actual loss,and the cases of second market, principle of direct loss; in estimation, Reasonable accuracy principle should be provided. Claims process should be front of settlement process. In settlement process, judges will own the power of Review and approval, and class members will own the right of objection in hearing stage. Allocation process may be provided refering that of United States of America, but the court should Initiatively start execution procedure.