On The Improvement Of China’s Securities Class Action System

The legal basis for China securities class action system is articles56 and 57 of The Civil Procedure Code,articles 95 of The Securities Law.The system currently consists of two mechanisms with relative independence: the ordinary representative action and the special representative action.The securities class action system,through the aggregation of the interests of a large number of victims,the introduction of representatives with professional knowledge and expertise,and the establishment of special mechanisms to support vulnerable victims,balances the substantive inequalities between perpetrators and victims,thus laying the foundation for the achievement of justice and social justice.The implementation and enforcement of the action system litigation system has strengthened civil liability for perpetrators of securities violations,curbed common capital market violations such as misrepresentation,fraudulent issuance and financial fraud,and better protected the legitimate interests of investors in the securities and capital markets.However,there are certain deficiencies in the action system litigation system itself,which affect its proper function.Firstly,the relationship between ordinary representative actions and special representative actions is not reasonable.In practice,the special representative litigation should be initiated on the premise of the pre-existence of ordinary representative litigation,and the transformation and interface of these two mechanisms is more complex,resulting in cumbersome procedures,low efficiency,resulting in special represent ative litigation is difficult to effectively play its proper function.Secondly,there is a lack of competition in the creation of representatives for action system litigation.The investor protection agency is the only one,in the special representative of the litigation of the qualification of the representative.The lack of effective competition for representation not only prevents the use of professional human resources to enhance the efficiency of the system’s operation,but may also give rise to integrity risks.Thirdly,the filing of action system actions is subject to specific pre-conditions such as administrative penalties and criminal sanctions.Although the judicial interpretation has removed some of the preconditions,but not all of them have been explicitly removed,and in practice there are still litigation habits that should meet the preconditions.Fourth,as rights hold ers,small and medium-sized investors are passive "silents" in action system litigation,not only difficult to participate in the whole process,comprehensive and substantial participation in the proceedings,but also unable to fully supervise the insurance institutions and other representatives.The relevant rights protection mechanisms are weak.The United States,Germany and Chinese Taiwan region securities class action system have their own characteristics.China needs to learn from the achievements of the securities class action system in foreign countries or regions,and learn from the provisions of the basic system to optimize the securities class action system in China.First,the relationship between the "two mechanisms" of ordinary representative litigation and special representative litigation should be improved,and the unreasonable requirement that the filing of the latter is subject to the former should be completely eliminated.The independence of these two institutions should be guaranteed and their respective advantages given full play,while clear conditions and reasonable procedures should be established for the transition and interface of these two mechanisms.Secondly,the mechanism for the creation of litigation representatives should be reformed.With the vision of building a fully competitive landscape,professional forces outside the existing insurance institutions should be introduced so that they can function as representatives as they should.Thirdly,all pre-requisites for securities class action should be explicitly removed,while publicity and education should be strengthened to eliminate unreasonable practices that unduly hinder the convenience and expediency of filing securities class action.Fourth,the right of small and medium-sized investors to substantive and full participation in the initiation and operation of securities class action should be emphasized,and appropriate mechanisms for redress should be established.Through the aforementioned improvements,China’s securities class action system to protect and safeguard the legitimate interests of small and medium-sized investors can be better realized.