China Issues Guiding Opinions on Judicial Safeguards for Capital Market Development

On May 15, the Supreme People’s Court and the China Securities Regulatory Commission (CSRC) jointly issued the Guiding Opinions on Strict and Impartial Law Enforcement and Judicial Services to Safeguard High-Quality Development of the Capital Market (the “Opinions”). The Opinions serve as a programmatic document for judicial safeguards in the reform and development of the capital market. The Opinions came into effect upon publication.

The Opinions put forward 23 provisions across five areas: overall requirements, investor protection, regulation of market participants, judicial-administrative coordination, and organizational implementation safeguards.

The Opinions stipulate that where judicial practice requires expertise from other disciplines such as economics, finance, accounting, and auditing, the opinions of professionals shall be solicited. It calls for cracking down on fraudulent issuance and fraud in financial information disclosure, and strictly pursuing legal liability against issuers, their controlling shareholders, actual controllers, relevant intermediary institutions, and third parties (such as suppliers) that abet or assist in financial information disclosure fraud. The civil liability system for false statements shall be improved, with industry practice standards and business rules serving as the primary basis to further consolidate the responsibilities of intermediary institutions.

The Opinions emphasize advancing the improvement of diversified dispute resolution mechanisms, strengthening consultation and information sharing mechanisms, ensuring coordination between judicial procedures and administrative supervision procedures, and comprehensively enhancing the quality and efficiency of judicial adjudication, enforcement, and administrative supervision penalties. It also requires optimizing the jurisdiction and trial mechanisms for financial cases, strengthening financial adjudication mechanisms and two-way exchange and training mechanisms, and continuously improving the standardization and legalization of regulatory enforcement.