Investors and lawyers are sceptical of any large wave of lawsuits being filed. FMTNews China
SHANGHAI: China wants its army of mom-and-pop investors to take corporate fraudsters to task with landmark class action lawsuits, but heavy government involvement means they are not likely to be as common as in other legal systems, lawyers and investors said.
The CSISC said it would initially select “typical, major cases with wicked social impact and exemplary significance”.“I think it’s going to be complicated … because if a company is very strongly backed, for example, by the local government, do you dare bring a class action suit against it?” said Marcia Ellis, Hong Kong-based Partner at Morrison & Forester.
Accounting fraud at firms including Kangmei Pharmaceutical and Kangde Xin Composite Material Group risk damaging investors’ trust in China’s financial markets, Yi Huiman, China’s top securities regulator, said in May. But even with the new framework, class action lawsuits “won’t be used as extensively in China as they are in the US”, activist investor Xu Caiyuan said.
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