Liabilities Of Listed Companies' Directors And Officers For Misrepresentation In China

Starting from the theory of market failure in western economics, this paper discusses the significance of mandatory information disclosure to securities market,analyzes the harm of misrepresentation to securities market and substantial economic market. After explaining the concept, forms and liable parties of securities misstatement, it explores the practical basis and legal foundation of holding directors and officers liable for misrepresentation of listed companies. Their legal liabilities possess kind of dual nature: on one hand, they are economically compensatory civil liabilities; on the other, disciplinary liabilities within market regulation. The dual nature not only determines the fundamental objectives of modern securities regulatory scheme, but also sheds light on the whole process of institutionalizing information disclosure. Then this article compares the similarities and differences in standards for finding misrepresentation, theoretical basis for civil compensation, scienter, extent of punishment and sufficiency of remedies, etc., during China's learning from the U.S. system of imposing liabilities on directors and officers of listed companies for misrepresentation. Finally, as to the deficiencies, revealed in the foregoing comparison, in China's system of holding directors and officers liable for listed companies'misstatement, the following suggestions are made to improve the system: follow the balancing guidelines, make full use of market forces, better the scheme of civil liabilities and advance corporate governance of listed companies.