On The Issue Of Predictive Information Disclosure In The Securities Market

Predictive information refers to the judgments,analyses,evaluations and other prognostic statements made by listed companies to the public regarding the future business and growth of enterprises.The current practice of predictive information disclosure in China is not satisfactory,with low willingness to disclose,frequent changes in performance and low accuracy,affecting the validity of China’s securities information disclosure market.Therefore,the predictive information disclosure in China’s securities market is required to be regulated urgently.On January 21,2022,the“Several Provisions of the Supreme People’s Court on the Trial of Civil Cases for Damages for the Tort of Misrepresentation in the Securities Market” was launched by the Supreme People’s Court,which innovatively established a civil safe harbor provision for misrepresentation for listed companies’ forecast information disclosure,specifying that when the forecast information in the disclosure document is not in line with the actual operation situation,it does not constitute the misrepresentation and is thus exempted from civil liability for misrepresentation.At the same time,three exclusion clauses of the safe harbor rule are clarified.This safe harbor rule provides double protection for both the listed companies and investors,and also provides legal compliance with certainty for uncertain predictive information,which has positive significance.However,there are still some unclear areas in the understanding and application of the rule.In view of China’s situations and foreign experience,this article discusses the legal basis of the safe harbor rule for predictive information disclosure,the identification and judgment of predictive information,the influence of subjective awareness of listed companies on the application of the safe harbor rule,and the application of the exclusion clauses of the safe harbor rule for predictive information disclosure.Although the safe harbor rule for predictive information disclosure in China is set under the items of the objective “determination of misrepresentation”,the ultimate purpose of the legislation and the overall rule system is to clarify that predictive information disclosure is in principle not subject to civil liability.The design of the Predictive Information Safe Harbor Rule is rooted in the uncertainty of information and aims to clarify the boundaries of obligations for listed companies and encourage them to actively engage in predictive information disclosure.The jurisprudence of the three exclusion clauses of the Predictive Information Safe Harbor Rules is that,the failure to provide risk warnings does not satisfy the basic characteristics of predictive information disclosure,and that predictive information disclosure accompanied by adequate risk warnings helps to balance the rights and obligations of both listed companies and investors by achieving “seller’s duties” so that the material deviation of forecast and its consequence belong to the scope of “buyer’s responsibility”.The sufficient risk indication can also reduce the materiality basis of misrepresentation.The act of listed companies’ choosing obviously unreasonable forecast preparation basis will lead to inaccurate information disclosure.By choosing reasonable preparation basis,listed companies can avoid the occurrence of subsequent misrepresentation due to their own defective behavior.The “obligation to correct” under the safe harbor rule is essentially an “obligation to update”.Under the continuous information disclosure system,listed companies can timely fulfill the obligation to update to prevent the prior information from being misleading,thus avoiding their disclosure acts from constituting misrepresentation.The prerequisite for the effective implementation of the safe harbor rule for predictive information disclosure lies in the clarification of the scope of application of the safe harbor rule,but the current regulatory system in China has not yet made a comprehensive statement on the definition of predictive information.Predictive information is not equivalent to soft information.The predictive information that can be subject to the safe harbor rule on predictive information disclosure should have at least the theoretical support so that investors have reasons to rely on the information and take it into consideration in their decision-making.In determining whether a materially mixed statement is predictive information,it is necessary to analyze it on a case-by-case basis from the perspective of the investor’s claim,the focus of investor reliance formation,and the place and role of predictive information in the overall disclosed information.For semantically mixed statements,courts should be careful to avoid including historical information within the protection of the safe harbor rule for predictive disclosure.The form of predictive information subject to the safe harbor should not be limited to written disclosures,but should also include oral predictive information made in a public manner,with specific identification,in a legal disclosure channel by a person representing the listed company or by a specific person with a specific connection to the information.In addition,predictive statements made by a listed company when it knew at the time of disclosure that the disclosure was a misrepresentation,or predictive statements made by a listed company in good faith at the time of the initial disclosure but not corrected when it subsequently knew that the prediction was a misrepresentation,shall not be covered by the safe harbor rule.In judging whether the listed company has made sufficient risk indication on the important factors affecting the realization of forecast,the court should note that the risk indication must be substantial and specific.If the listed company adopts a boilerplate risk indication expression or only gives a general description of the risk factors affecting the realization of forecast,the court should not find that this risk indication reached a sufficient degree.The “material factors” included in the risk indication do not require all the factors.As long as the listed company has identified the risk factors specific to its business and the content of the forecast,and has made reasonable analysis and disclosure in detail and specifically,the forecast information can still be protected by the safe harbor rule.In addition,the court needs to consider the format,form and content of the risk warning,and make a comprehensive judgment in conjunction with the validity of the content of the risk warning.In determining whether the selection of the basis for the preparation of forecast information for a listed company is obviously unreasonable,the court should determine the degree of reasonableness from an ex post facto perspective.At the same time,the court also needs to consider the reasonableness of the selection procedure of the forecast preparation,to ensure that the basis of forecast assumptions is made on the basis of authoritative and reliable information,and to examine whether the basis of preparation applied to the forecast information is highly consistent with the basic accounting assumptions of the company and the selection principles.In judging whether the listed company fulfills the obligation to update in a timely manner when there is a material change in the premise on which the forecast information is based,the court shall appropriately narrow the scope of the obligation.This duty should only apply to the case where there is a material change in the premise of the material forecast information and the forecast information is still material at the time of the update.Meanwhile,the updated predictive information should be relevant to the information disclosed earlier in terms of content.