Under article 69 of the Securities Act of the People’s Republic of China

Issuancers, equity notes for public company announcements, corporate bond collection schemes, financial accounting reports, public reporting documents, annual reports, mid-term reports, interim reports and other information disclosures, with false records, misleading statements or significant omissions, which cause investors to lose in securities transactions, issuers, listed companies should be liable; issuers, directors of publicly listed companies, supervisors, senior managers and other direct liability agents, as well as bearers, securities companies, etc., should be held liable with the issuer, the listed company, but could prove that they were not mistaken: the distributor, the owner of the company, the shareholders in control of the company.

Explanation:

This article is a provision on liability in the event of false documentation, misleading statements or significant omissions of information published by issuers and listed companies.

Under this Law, issuers, listservations in public company announcements, corporate bond collection, financial accounting reports, public reporting documents, annual reports, interim reports, interim reports and other information disclosures must be authentic, accurate and complete. If there is false documentation, misleading statements or major omissions, the information received by the public in society is not authentic, incomplete or misled by the information and makes false judgements on this basis. This miscalculation would result in investors buying or selling securities at inappropriate times or at inappropriate prices, thus causing losses in securities transactions. Since such losses by investors are caused by falsely documented, misleading statements or significant omissions of information disclosed by distributors, listed companies, they should be compensated for the loss suffered by investors irrespective of whether or not the issuer or the listed company is subjectively wrong.

The Board is a distributor, business decision-making and executive body of listed companies. Senior managers are responsible for the day-to-day management of companies, and the Board oversees the management of distributors and listed companies. In the context of information disclosure, the Board, senior managers are responsible for the drafting, verification, advertising, etc. of corporate information disclosure information, which will be monitored by the Board and senior management. If the above-mentioned document of the issuer, the public company announcement is falsely documented, misleading or has significant omissions, there is an error in serving as a member of the board of directors, as a member of the Board, as well as in senior management and other directly responsible persons. The issuer, directors of listed companies, supervisors, senior managers and other directly responsible persons shall be liable for joint liability for investors who have suffered losses in securities transactions as a result of false recordings, misguided statements or major omissions of information in their bulletins, unless they can prove that they were not mistaken. This is a presumption of fault, i.e. the injured investor is not required to prove that the above-mentioned person has been wrong, and if the above-mentioned person wants to be excused, it is necessary to provide evidence that he has not been mistaken.

The primary responsibility of the CNP is to recommend the release of eligible enterprises and to ensure that the applicant is in compliance with the conditions for the distribution of the documents on the market. If the information disclosed is falsely documented, misleading or materially omitted, it is first presumed that the insurer has been wrong and has legal responsibilities, and the only reason for this is that it can prove that it is not wrong. Securities deposit is the act of the securities agency to assist the issuer in marketing the securities it issues under the undertaking agreement. In assisting the issuer in marketing the securities it issues, securities companies should likewise verify the authenticity, accuracy, completeness of the publicly issued collection documents, find false, misleading or material omissions, do not carry out marketing activities, sell them immediately and take corrective measures. If the information disclosure is falsely documented, misleading or materially omitted, it should be subject to joint liability with the issuer, the listed company, unless it can be proved that it has not been wrong.

Shareholder holdings are shareholders whose holdings represent more than 50 per cent of the total equity of the listed company; or whose holdings, though less than 50 per cent, enjoy voting rights under their holdings that have a significant impact on the resolutions of the shareholders’ congresses. The issuer, the controlling shareholder of the listed company, the actual controller, while not producing and advertising company information disclosure, is able to dominate or control the company’s conduct, including the production and advertising of equity notes, corporate bond collection, financial accounting reports, public reporting documents, annual reports, interim reports and other information disclosures. However, the issuer, the listed company and its shareholders and the actual controller are, after all, two distinct legal persons, and in general each subject is responsible only for its own conduct, and the originator, the controlling shareholders of the listed company, the actual controllers are not obliged to assume responsibility for the conduct of the distributor and the listed company. However, if the issuer, the controlling shareholder of the listed company, the actual controller, the distributor, the publicly listed company discloses information, it should also be held responsible for causing the investor to lose in the securities transaction by making, giving instructions to the issuer, producing, disclosing falsely documented, misleading statements or material omissions.