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High Court Reversal Backs Stock Investors

The Supreme People's Court yesterday reversed a September decision and announced that courts will now hear civil cases involving listed companies that have lied in their information disclosures.

But the courts will still not take up civil cases against listed firms found to be involved in market rigging and inside trading, according to Vice-President of the Supreme People's Court Li Guoguang.

Li said at a press conference that starting from yesterday, investors can take to court companies after the China Securities Regulatory Commission (CSRC) or its branches decide that fraud has been committed and punishment has been passed down.

"The latest measure will play an active role in punishing violators on the stock market and protecting the rights of small and medium investors," said Li.

The CSRC was not available yesterday for comment on the new measures.

According to the new judicial interpretation, investors whose rights have been infringed upon can either file lawsuits separately or jointly, but the possibility of class-action is still ruled out.

Last September, some 363 small shareholders of Yorkpoint Science & Technology, a Shenzhen-listed company caught engaging in institutional price manipulations, filed a class-action suit against the company and also the company price-riggers who had netted huge sums of money for themselves.

The Guangxia (Yinchuan) Industry Co, a floppy-disc-producer-turned-biochemical firm listed in the Shenzhen Stock Exchange, found of cheating in information disclosure, was also brought to court by a number of small and medium investors in local courts in Shanghai and Wuxi, East China's Jiangsu Province.

The trials of these cases were suspended in September when a notice issued by the Supreme People's Court claimed that the related regulations and conditions for hearing such cases needed improving.

Some legal professionals contended that China's current Securities Law, which took effect in July 1999, does not say much about the civil rights of shareholders.

However, Yan Yiming, a lawyer of the Shanghai Allbright Law Office, said that shareholders of the Guangxia stocks still need to wait because the punishment the CSRC imposed on the rule-breaking company has not yet come out, a precondition the Supreme People's Court has set for taking up the cases.

Yan was representing individual shareholders of the Guangxia stocks when the case was halted in September in the Shanghai No 1 Intermediate People's Court.

"They are determined to carry on with the case now that the Supreme People's Court has issued the judicial interpretation," said Yan. "The new measure will be a booster to investors in the stock market."

(China Daily January 11, 2002)

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