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III. Liability:
Misleading conduct in the public offer documents in China is defined as “any falsehoods, misleading statements or major omissions in the public offer documents. Under the Law in China and Australia, the application documents for the issuing of securities should be truthful, accurate, and complete.[xxii] The principle of truthfulness, accuracy and completeness of the documents is the basic requirement for information disclosure. The Securities Law also provide professional institutions, such as law firm, audit company, and individuals that produce relevant documents for issuance of securities shall strictly perform their statutory duties and warrant the above requirements.[xxiii]
The company also must make a listing announcement prior to the public issue.[xxiv] The Company Law in China sets out strict requirements for companies to list shares on the exchanges. According to the Company Law, the State has maintained strict control over which companies have been allowed to issue stocks and trade on the Shenzhen and Shanghai market. The registration process requires approval from the State Council. This approval is significantly different from approval in Australia which is meant to protect investors. In China, approval is meant to keep publicly traded shares within the State’s economic plan. Such approval will restrict those small but high-tech companies to be traded publicly[xxv]. Company disclosure during the listing process seems to provide that the company seeking to make a public offering meets the prevailing State plan. This objective contrasts with the goal of disclosure in Australia securities regulation which is meant to protect investors. In addition, the CSRC is State administrative entity acting in a public manner and often makes sudden announcements or notice that could affect market prices
Remedies:
In Australia, the liability in this case may be penal or civil. It may be liability to a penalty imposed with the purpose of punishing by way of deterrence and serving the interest of the community in obtaining retribution. It may be civil liability imposed with the aim of providing a remedy by way of compensation for a person who has suffered loss.[xxvi]
Today, the Financial Services Reform Act (2002) expanded the civil penalties under the Corporations Act. But the efficiency of such a measure is yet to be seen. ASIC has shown in the past a reluctance to use such a remedy. For example, from 1993 to 1999, ASIC has shown an only started 14 civil penalty actions. This number is really low considering the amount of complaints presented to ASIC and the quantity of investigation done by this regulator. The fact is that the total of these elements would definitely exceed such a paltry figure. There does not seem a real desire to this body corporate to implement this sanction.[xxvii]
Certain authors think that the reason behind this lack of motivation is that the effectiveness of civil penalties is limited because the main worry of investigators is on practical matters like attributing responsibility and tracing assets in a matter. Civil penalties are not especially useful in such issues.[xxviii] Other more effective remedies like injunctions and stop order can be found. There is also the doubt of efficiency of lower courts ruling on civil penalty contravention and the fact that those decisions will probably be re-argued in the Federal or Supreme Courts, which will take lots of time. Research[xxix] has shown that the civil penalties regime is perceived by ASIC as having a limited deterrent function. Civil penalties are not as swift, decisive an obvious in there effects as many alternative civil remedies like injunctions.
But today there seems that there is a change in ASIC’s approach toward civil penalties. Between 1999 and December 2001, ASIC appears more active in relation to the use of civil penalties. It has brought civil penalty actions against 30 people relating to 12 case situation. This number by itself shows the change in ASIC perspective. This reality is different from the Chinese perspective were civil penalties are none existent in security laws.
Is there a civil liability in China?
In China under the Securities law, article 24 and article 59 provide the requirement of relevant documents. According to these two articles, the truthfulness, accuracy and completeness is the basic requirement of the public offer documents and the documents for the issuing and listing of shares or corporate bonds announced by companies. Article 24 and Article 63 further provide the remedy where the above listed requirement has not been fulfilled. Under the article 24, if a securities company finds any falsehoods, misleading statements or major omissions in the public offer documents, it may not carry out the sales activities. If it has already begun to sell the securities, it shall immediately discontinue the sale activities and adopt remedial measure which links to the article 63. Article 63 provides that:
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