Intensifying investigations carried out by the China Securities Regulatory Commission (CSRC) in recent years have led to a surge in the number of listed companies that have been imposed administrative penalties for information disclosure violations, insider trading, and other acts of fraud.

Shareholders may take securities fraud actions demanding that the company compensates for the losses incurred. These legal actions have unique features that distinguish them from the other civil or commercial suits, and have contributed to the rise of a new profession: the rights defense lawyer. Increased support for litigation financing followed, as did the shaping of judicial practice.

The Offense

The rights defense lawyer

Where there is a demand, there is a market. If a listed company has committed a fraudulent act, the affected shareholders can claim compensation according to relevant judicial interpretations of the Supreme People's Court (SPC). But the technically challenging nature of these rights defense cases calls for legal professionals with specific skills. These lawyers specialize in tracking the developments in administrative penalties on listed companies and, on this basis, recruit shareholders, establish an engagement relationship, and represent them in lodging claims against listed companies.