Assessment Of Materiality For Securities Misrepresentation

The trend of promoting the freedom of enterprise financing since the 1960 s is inextricately related to the materiality of misrepresentation in the securities market.The materiality was created to protect investors and reduce the cost of corporate information disclosure.At the same time,the Supreme Court of the United States has established a reference path for the materiality of misrepresentation through a series of classic decisions.However,in the process of continuous development and maturity of China's securities market,the disputes of securities misrepresentation are increasing day by day.The raising or lowering of the standard of the materiality of misrepresentation will affect the cost of investor protection and enterprise information disclosure from various aspects.Therefore,new requirements for the identification of the materiality are constantly put forward in various ways in legislation and judicatory.There are few studies on the materiality of misrepresentation in China.The focus of the misrepresentation dispute is still on the tort determination,civil liability,causal relationship determination and damage determination standard of the misrepresentation dispute.The materiality is very demanding for conceptual understanding.Due to the characteristic of circular argumentation inherent in the materiality standard,it is inevitable to face the challenge of ambiguity and confusion in the application and understanding in the judicial practice of our country.The purpose of this paper is to provide new guidance for the important and difficult points(that is how to determine the materiality)of the trial according to the shortcomings of the judicial judgment in China.At the level of system and precedent,this paper will firstly sort out the relevant legal provisions and current trial status of materiality standard in our country,and summarize the difficulties in the understanding and application of the current materiality standards,which are mainly the problems of unclear ownership of judging rights,the disorder of application of price-sensitive standards and the formalization of investor decision standards.Starting from the above problems,this paper tries to explore the way out of the problem from multiple angles.As a matter of fact,administrative penalty has been regarded as the preposition procedure of trial in our country's legal system.For a long time in practice,the identification of misrepresentation in compliance with the standards of materiality is equivalent to the company's administrative punishment and has been effective.It is only in recent years that there has been a phenomenon of the court's independent judgment criterion.Therefore,from the perspective of empirical analysis,this paper will firstly gradually analyze the attitude towards the standard of materiality in administrative punishment,and few regulatory authorities will make specific explanation on whether the misrepresentation constitutes materiality in punishment.Secondly,this paper will make a critical review of the major legal norms and classic cases of misrepresentation in the United States,in order to summarize the references.By means of comparative research and case analysis,this paper makes an in-depth analysis of a series of classic cases in which the United States courts provide reference value for the materiality standard in judicial practice,and summarizes the materiality standard.From the case SEC v.Texas Gulf Sulphur that materiality standards from the probability of the misrepresentation,and the company as a whole for the balance between the magnitude of the misrepresentation in the judgment,the materiality standard is for "reasonable investors think the information disclosure will be the total mix of a large possibility to change the information provided" in the case TSC Industries,inc.v.Northway,and in the end,Basic case and Matrixx case and Alibaba case in deepening investor decision standard.Based on the empirical analysis of China's judicial practice and administrative penalty and the study of Chinese and American comparative law on the materiality standard,the last part of this paper will focus on exploring the development direction of the materiality standard.On the basis of making it clear that the court should review the materiality standard,the investor decision standard should be improved on the quantitative and qualitative levels,and the framework of reasonable investors under the standard should be constructed.Re-understand the value of the price-sensitive standard in the materiality standard,and reveal the rationality and theoretical defects of the standard.The significance of the materiality standard in China's judicial practice should be explained by taking the investor decision standard as the main criterion and supplemented by the price-sensitive standard.