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Today, the Shanghai Financial Court concluded the trial of the case of investors v. Zeda Yisheng (Tianjin) Technology Co., Ltd., a company listed on the Science and Technology Innovation Board, and 12 defendants, including actual controllers, executives, and intermediaries, over liability for securities misrepresentation. China Securities Small and Medium-sized Investor Service Center Co., Ltd. received full compensation of more than 280 million yuan on behalf of 7,195 qualified investors. This case is the first case in China involving a special representative lawsuit involving a listed company on the STAR Market, and the first securities class action settlement case in China.
In April 2023, Zeda Yisheng Company was made an administrative penalty decision by the China Securities Regulatory Commission for concealing important facts and fabricating material false content in the announced securities issuance documents, and there were false records and major omissions in the disclosed annual report.
On April 28, 12 investors sued Zeda Yisheng Company, its actual controllers, executives, and relevant intermediaries to the Shanghai Financial Court, requesting that Zeda Yisheng Company be ordered to compensate investors for the loss of the difference, commission and stamp duty, and the other defendants bear joint and several liability for compensation.
On July 21, SME Investment Service was specially authorized by some securities investors to apply to the Shanghai Financial Court to participate in the litigation as a representative. The Shanghai Financial Court decided to apply the special representative litigation procedure to hear the case. According to the rule of "implicit accession and express withdrawal" in the special representative lawsuit, the number of qualified investors in this case was 7,196. It is estimated that the total loss of all plaintiff investors is more than RMB 280 million.
Considering that the determination of the facts involved in the case is relatively clear, and the defendant's civil liability for compensation is in line with the expectations of the parties, the actual controller, senior executives, In order to effectively reduce the cost of protecting investors' rights, protect the rights and interests of investors to the greatest extent, and at the same time give the defendants the opportunity to make up for their own faults, and reduce the negative impact of illegal events on the capital market, especially the STAR Market, the Shanghai Financial Court decided to organize all parties to carry out mediation to promote the substantive resolution of disputes.
On December 5, after mediation presided over by the Shanghai Financial Court, SME signed a draft mediation agreement with the 12 defendants on behalf of all the plaintiff investors and submitted an application to the Shanghai Financial Court for the preparation of a civil mediation document.
The Shanghai Financial Court issued a notice to all plaintiff investors and held a hearing on objections to the draft mediation agreement on December 12, and two dissenting investors signed up to attend the meeting.
The investors' objections mainly focused on the calculation method and results of the loss amount and the deduction of risk factors in the securities market. After the hearing, the collegial panel decided to draft a civil mediation document after comprehensively considering factors such as the investor's opinions, the legal and factual circumstances involved in the case, and the legality, appropriateness and feasibility of the draft mediation agreement. During this period, 1 investor applied to withdraw from the mediation, and the final number of investors participating in the mediation was 7,195.
According to the mediation agreement, each responsible entity will pay full compensation of more than 280 million yuan according to the amount of compensation approved for the loss of the third party, of which Zeda Yisheng Company, the actual controller Lin, and the directly responsible person in charge should bear the main liability for compensation, and other directly responsible personnel of Zeda Yisheng Company, the intermediary agency of securities issuance and its directly responsible personnel shall bear the corresponding liability according to the degree of their respective faults.
In this case, 99.6% of the investors actually participated in the mediation represented by the insurance institution, which is highly representative and covers a wide range of investors. Among them, a single investor received a maximum compensation of more than 500 yuan, and an average of 38,900 yuan per person. After the mediation of the case, the compensation of all plaintiff investors will be automatically distributed to the securities fund accounts of all plaintiff investors through the full-cycle compensation distribution mechanism established between the Shanghai Financial Court and the Shanghai Branch of China Securities Depository and Clearing Co., Ltd., so as to ensure the safety, efficiency and convenience of legitimate rights and interests.
Lin Xiaoni, the presiding judge of the case and vice president of the Shanghai Financial Court, said: "This case is the first attempt at the settlement of securities class actions, in the mediation, the collegial panel adheres to the principle of 'punishing the first evil' and 'substantive dispute resolution', and clarifies in the civil mediation document that the listed company and the actual controller bear the main responsibility, and resolutely implements the spirit and requirements of the Party Central Committee and the State Council for 'zero tolerance' for illegal and criminal acts in the capital market; Follow-up recovery and other factors, resolve disputes efficiently and finally through reconciliation, and strive to achieve a balance between the protection of the rights and interests of small and medium-sized investors and the effective control of securities market risks. ”
In the next step, the Shanghai Financial Court will continue to thoroughly implement the Central Financial Work Conference's recommendations on better playing the role of the capital market as a hub. Promote the deepening and implementation of the registration-based system for stock issuance, continue to optimize the securities mass dispute resolution mechanism, effectively reduce the cost of investors' rights protection, further improve the level of rule of law in the capital market, inject confidence into listed companies and investors, and escort the steady and long-term implementation of the Science and Technology Innovation Board and the registration-based reform.
(Take a look at the news Knews reporter: Pan Wenting Zhao Yiyun)