Comparative Research On The Civil Liabilities Of Securities Fraud In Mainland China And United States

Securities Law of The People’s Republic of China has been slightly modified by National People’s Congress in 2014 in order to promote the reformation of the registered system of shares issuance. However, the civil liability section which is an quite important method of investor protection has not been considered. The provisions about the civil liability of false statement, insider trading, market manipulation and fraud are too abstract to meet the needs of practice in protecting investors.This article analyses the diversity of the nature of the civil liability for securities fraud from the particularities of the stock market and legal relationship aforesaid. From the perspective of law and economics, this article argues the necessity of improving the civil liability system of securities fraud by building a model according to the Game Theory. Moreover, this article tries to draw lessons from the experiences of the United States by comparing the elements of civil liability and civil remedies respectively stipulated in China and U.S. Apart from the foreword, the article includes four parts:The first part is about the legislative system of securities fraud. Firstly, a general provision that prohibit securities fraud is stipulated in Securities Act of 1933. Secondly, by comparison of the Sino-US securities market regulation, it can be concluded that the public authority of China Securities Regulation Commission should be limited.The second part is the multifarious natures of the civil liability of securities fraud. Apart from breach of contract and tort liability, contracting fault liability is also one of civil liability types for securities fraud. However, tort liability is preferred as the basis of civil liability in stock fraud mainly because it cost less without the restriction of privity which is the nature of contract.The third part is on the elements of civil liability of securities fraud which include the subject element, subjective intent requirement, causal relationship, behavior and “ materiality ” by comparing the legal system of U.S. and China. The provisions about the causal relationship between misrepresentation and damage in Securities Law and “1.9 Rule” can be amended on the reference of “fraud-on-the-market theory” and “reliance principle” of U.S. Law.The fourth part is the forms of the civil liability for securities fraud. This section focuses on the scope and calculation method of damages based on tort law, and breach of contract based on the law of equity.The last part is the necessity to work on the perfection of the civil liability for securities fraud. On the one hand, the necessity can be seen in the modal. On the other hand, the investors can get compensation for their loss. It has capabilities of deterrence and prevention for the people who has conducted fraud or intend to do so.