A Study On Sponsors' Civil Liability In The Issuance Of Securities

The civil liability of sponsors in the issuance of securities is to compensate the securities purchasers'loss caused by misrepresentation in the prospectus. This article deals with some aspects of the liability for misrepresentation, which is special for sponsors, including jurisprudential basis, character, doctrine of liability fixation, grounds for exemption, the liability of the employees of sponsors, and the contribution and indemnification among sponsors and other joint tort-feasors.The author mainly employs the research means of history analysis, comparison analysis, case analysis and economic analysis. To begin with, the article analyzes the function of the disclosure regime of securities market and the role of sponsors under the issuance sponsor regime and underwriters under the issuance non-sponsor regime, and compares the issuance sponsor regime and the issuance non-sponsor regime. Then, the article discusses the jurisprudential basis, character, doctrine of liability fixation, grounds for exemption of the civil liability of sponsors in the issuance of securities. In addition, the liability of the sponsors'employees for misrepresentation, including whether they should be directly liable to investors, doctrine of liability of fixation, grounds for exemption if they should assume the liability, is analyzed. Finally, the article studies the contribution and indemnification among sponsors and other joint tort-feasors.In the writer's opinion, both sponsors under the issuance sponsor regime and underwriters under the issuance non-sponsor regime play a role of a general gatekeeper and are obligated to make reasonable investigation of the issuer. So the study on the liability of underwriters of the issuance non-sponsor regime is helpful for the research of the liability of sponsors under the issuance sponsor regime. The reason for sponsors'liability is that sponsors violate the law which is designed to protect securities purchasers, and causes loss to them. So, the character of sponsor's liability is tort liability. Sponsor's liability is that of joint tort, and sponsors, issuers, professional intermediary organizations and other persons should be jointly and severally liable. The doctrine of presumptive wrongs should be adopted for the sponsor's liability, and sponsors should be exempted if they can successfully prove that they have exerted due diligence. The information disclosed by issuers should be divided into three categories-official portion, expertised portion, and other portion- in order to establish the standard of sponsors'duty of reasonable investigation and defense of due diligence, and the standard varies with different part. The sponsors'employees who sign on the prospectus and the recommendation letter of issuance should be jointly and severally liable with the sponsor, unless they establish the defense of no fault. Every person who should be jointly and severally liable becomes liable to make any payment for misrepresentation may recover contribution from any person who, if sued separately, would have been liable to make the same payment.Meanwhile, some amendments, related with aforesaid problems, to the Securities Law of the People's Republic of China, Guidelines for Sponsor's Investigation, and Some Provisions of the Supreme People's Court on Trying Cases of Civil Compensation for Misrepresentation in Securities Market are suggested.