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China's stock traders are turning to the law to protect their interests, with the country's first civil lawsuit against stock price manipulation expected to be launched next month, a lawyer said on Thursday.
Hundreds of minority shareholders of Yorkpoint Science & Technology, a Shenzhen-listed company caught engaging in institutional price manipulation, have signed up as plaintiffs to sue the price riggers, who have secured huge gains for themselves but caused losses for the ordinary investors.
In addition to four Guangdong investment companies that were caught manipulating the price of Yorkpoint stocks between October 1998 and February 2000 through shifting the stocks within their own accounts, Yorkpoint itself may also be put on trial for joint liability and fake information disclosure during the period, though the final list of the accused is still to be settled on.
The companies have not formally responded to the case yet.
Lawyers who are handling the case said the plaintiffs would ask for a certain amount of compensation for their financial losses, though the figure is still to be finalized.
"I know the case will be tough, but at least it has sprinkled some hope for recovery of part of the money,'' said an investor from Chengdu, capital of southeast China's Sichuan Province.
By Thursday afternoon, more than 210 minority shareholders of Yorkpoint from all over the country had registered in the Beijing Zhonglun Jintong Law Firm, which has eagerly accepted the case and is now busily involved in preparing the case, said Guo Feng, the firm's lawyer in charge of the case.
Registration for the first group of shareholder clients will run until June 12. Then two or three plaintiff representatives would be chosen. When all documentary preparation is done, the lawsuit will be formally submitted to the local court as early as the start of next month, said Guo.
Earlier in April, the price riggers were ordered to hand over their illegal gains together with 449 million yuan (US$54 million) in fines to the state after the China Securities Regulatory Commission announced the result of its investigation.
"But that was just a sort of administrative punishment, which will not make up for the losses of innocent investors,,'' said Guo.
Asking for civil compensation is the most efficient way for them to recover their losses, he said.
"But it will not be easy,'' he admitted.
The biggest obstacle stems from the fact that the Securities Law does not carry terms of civil compensation in case of irregularities or misconduct on the part of listed companies, fund managers and brokerages, analysts said.
Therefore, the plaintiff can only sue for compensation for breach of civil rights, which needs more concrete proof.
In many cases, securities rule breakers face only administrative punishment, including fines that should be paid to the state, said Li Yining, director of the Financial and Economic Committee of the National People's Congress, China's highest legislature.
But legislators are considering adding terms of civil compensation to the drafted Investment Fund Law. They are also expected to revise the Securities Law and Corporate Law to clarify investor rights to sue for compensation.
(Chinadaily.com.cn 06/08/2001)
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