Legal Research On China Securities Investor Services Center Participating In Securities Representative Litigation

In recent years,there occurred illegal cases frequently in China's capital market which have seriously damaged the legitimate rights and interests of investors.However,the tort disputes in the securities market demonstrate the characteristics of "small amount of claims but large amount of victims",which means that the number of damaged investors is large but their respective losses are small resulting from little investment.Therefore,these small and medium-sized investors are easy to fall into the collective action dilemma-considering their own economic cost,they will not file civil litigation to pursue the legal liability of the violators and ask for losses compensation,subsequently resulting in that the illegal costs which the relevant violators should bear are not corresponding with the harmfulness of their action.At the same time,with the revision of the Securities Law in 2019,China's capital market is about to gradually and fully the registration of securities offering,and the relaxation of the "front end" shall be urgently accompanied by the tightening of the "back end".How to solve collective action dilemma in securities tort civil litigation and granting the class action of securities tort a daunting force deserves comprehensive consideration and discussion.Satisfyingly,the newly revised Securities Law also responded to above problem,activating the uncertain number of representative litigation system stipulated in Article 54 of the Civil procedure Law,introducing investor protection institutions as the litigation representative,and further establishing the principle of "implied entry and express withdrawal" under this litigation mode.This paper,starting from the top-level design of the Securities Law,and on the basis of proving the legitimacy of the representative subject qualification of investor protection institutions,clarifies the scope of the rights of investor protection institutions in the securities representative litigation system,and discusses the establishment of incentive and supervision mechanism for the performance of the investor protection institutions,in order to make efforts in improving the efficiency of securities representatives litigation with the participation of investor protection institutions.The Securities Law directly endows investor protection institutions with the status of the litigation representative,but in China's traditional civil procedure law system,litigation representatives are usually selected from plaintiffs who have a direct interest in disputed facts.Although China Securities Investor Services Center(SISC),as the securities and financial investor protection agency approved by the China Securities Regulatory Commission,has already held the shares of all companies listed on the Shanghai and Shenzhen stock exchanges,it is not necessarily a qualified plaintiff who has a direct interest in specific securities tort cases.The legitimate basis of the breakthrough in the newly revised Securities Law of the traditional civil procedure law remains to be clarified.What needs to be further discussed is that there is a strict restriction on the substantive disposition of the litigation representative under the current Civil procedure Law,but this restriction seriously weakens the actual function of the securities representative litigation.Therefore,it is necessary to grant the representative the substantive disposition right in the securities representative litigation with the participation of SISC,so as to improve the efficiency of the collective litigation.Meanwhile,to prevent the excessive "squeeze" of the rights of the represented investors,it is also necessary to balance the representative rights of the expansion of SISC by granting the court supervision duty and establishing the second withdrawal system.Although the introduction of non-profit organizations into the collective litigation of securities tort matches the practice of China's capital market,there are also exist possible obstacles including but not limited to lack of independence or absence of supervision mechanism.To sum up,it is advisable to establish an incentive and supervision mechanism for SISC to participate in the securities representative litigation from the following three aspects and urge SISC to better perform the duties of the litigation representative: firstly,strengthening the independence of SISC regarding the funds and personnel aspect to prevent improper intervention;secondly,improving information disclosure so as to facilitate the investors represented and the investors of SISC to supervise the performance of SISC;thirdly,opening up competition among investor protection institutions to further motivate them to perform their duties considering the long-term development of securities representative litigation.