In order to avoid errors in investment decisions in the securities market caused by the limited access to information by the public and the inability to timely obtain information on the operation of listed companies, the Securities Law and its relevant laws and regulations stipulate that listed companies have the obligation to timely disclose major events related to their company operations to the public. For the above disclosure obligation, if the listed company fails to perform according to law, and if there is concealment, delay in disclosing major events or falsification or fabrication of relevant announcement facts, it will constitute the False statement of securities under the Securities Law, which belongs to a kind of tort under the civil law.

     Based on the different types and purposes of concealing or fabricating facts, such securities False statement can be divided into "multiple False statement" and "empty False statement". "Diversified False statement" refers to the behavior of a listed company that conceals bad news and fabricates profitable facts, with the purpose of attracting investors to buy its listed company's securities. The "trap type" False statement behavior is the behavior of the listed company to conceal the profit information and fabricate the negative facts, which aims to urge investors to sell the securities of the listed company. The above two kinds of False statement were not differentiated in the old rules of 2003, but were only concepts in the theoretical circle, and were not clarified until the new rules were issued in 22 years.

     Since the relevant judicial practice on False statement was relatively scarce when the old rules of 2003 were promulgated, and there was still controversy in the theoretical circle about whether "False statement of the entrapment type" were tort acts, the Supreme Court did not distinguish the types of False statement during the formulation of the old rules of 2003, but chose to uniformly default securities False statement as "False statement of the entrapment type", And with this kind of False statement behavior as a model, a causal relationship identification standard with defects is formulated.

     03 The causal relationship determination standard of False statement confirmed by the old rules adopts the way of causal relationship presumption, which is specifically reflected in Article 18 of the old rules, "If the investor has the following circumstances, the people's court shall determine that there is a causal relationship between the False statement and the damage result: (1) the investor invests in securities directly related to the False statement; (2) the investor buys the securities on and after the implementation date of the False statement and before the disclosure date or the correction date; (3) On or after the disclosure date of the False statement or the correction date, the investor suffered losses from selling the securities or from continuing to hold the securities. " Unless the listed company can provide evidence to the contrary, the court will determine that there is a causal relationship between the listed company's infringement and the investor's losses in the three situations specified in the terms of the investor's trading behavior.

      03 The causal relationship determination standard of the old rule, because it is only a hypothetical infringement act of inducing multiple False statement, only considers the situation that investors buy transactions due to the fraud of listed companies, and the resulting Argument process is only derived from the above situation as a logical basis. The process of its Argument is that investors were lured by false information to buy securities at a high price, and then because of the fact that fiction was revealed, the decline in the value of securities eventually led to losses for investors. This set of causal relationship determination standards has been rigid and difficult to adapt in the process of judicial practice. Not only does it not take into account how investors compensate for losses caused by selling shares between the implementation date and the disclosure date due to the False statement of the listed company. It also occurred that although the investors met the above criteria for causal relationship determination, the False statement made by the listed company was a "trap" False statement, which could not match the causal relationship determination criteria specified in the old regulation 03, and the final judgment did not need to compensate investors for losses.

      Based on this, it can be seen that before the new regulations came into force in 22 years, judges in judicial practice, for reasons that could not be relied on, whether investors met the causal relationship determination criteria specified in the old regulation 03 or not, as long as the False statement made by listed companies were "entrapment" False statement, judges generally tended to believe that listed companies were not liable for compensation for their "entrapment" False statement. Of course, although this tendency towards judgment is a common practice, there are still very few courts that have provided their own unique opinions and standards for determining causal relationships in the trial process of similar cases.

    1. Background of the case

    Rainbow Refinement was listed on the Shenzhen Stock Exchange on June 25, 2008, with the securities code 002256 and the abbreviation of the securities being "Rainbow Refinement". On November 23, 2010, Shenzhen Green World Biodegradable Materials Co., Ltd. and Rainbow Refinement Co., Ltd. signed a "Cooperation Agreement on Shenzhen Rainbow Green World Biodegradable Materials Co., Ltd." and related memorandums, agreeing to jointly contribute to the establishment of Rainbow Green World Company. Shenzhen Green World Company and Rainbow Green World Company also verbally agreed that Shenzhen Green World Company guarantees that the net sales profit of Rainbow Green World Company shall not be less than 10%.

     Shenzhen Green World Company signed two Product Sales Agreements with Jiaxing International Co., Ltd. on December 12, 2010, with a total sales amount of 1920 million yuan. Rainbow Refinement Company sent Liu Ke and Wang Mingzhang to participate in the market and production planning meeting held by Shenzhen Green World Company on December 16, 2010. The meeting emphasized the contract signed on December 12, 2010. On December 17, 2010, Liu Ke passed on the "Green World Target Markets and Customers" slide provided at the meeting to Chen Yongdi through Secretary Jin, and introduced the meeting content to Guo Jian.

     On December 20 or 21, 2010, Liu Ke also sent the slides to Guo Jian and reported the meeting content to Chen Yongdi. Based on this, Rainbow Refinement Company is aware of the signing of a contract between Shenzhen Green World Company and Jiaxing International Company on December 12, 2010. According to the "Cooperative Operation Agreement" signed in advance between Shenzhen Green World Company and Rainbow Refinement Company, as well as the oral agreement between the two parties, "Shenzhen Green World Company guarantees that the net profit margin of Rainbow Green World Company's sales is not less than 10%", the aforementioned "Product Sales Agreement" may create a net profit of 130.1 million yuan for Rainbow Green World Company and indirectly create a net profit of 71.555 million yuan for Rainbow Refinement Company, This amount is 1.84 times the audited net profit of 38.9128 million yuan for Rainbow Refinement Company in 2009.

     The above matters may lead to a doubling of the net profit of Rainbow Refinement Company. Rainbow Refinement Company failed to timely disclose the significant event of Shenzhen Green World Company signing two "Product Sales Agreements" with Jiaxing International Company on December 12, 2010, which may create huge profits for Rainbow Green World Company and indirectly create huge profits for Rainbow Refinement Company. Later Rainbow Refinement Company was investigated by the China Securities Regulatory Commission and ultimately imposed administrative penalties due to the aforementioned failure to disclose significant positive news in a timely manner.

2. Court Opinion

From the background of the above case, it is not difficult to judge that the False statement of securities made by Rainbow Refinement in this case is a typical "trap" False statement. It deliberately conceals good news, so that investors can sell shares in advance, and ultimately can not obtain the stock returns they could have obtained. For this case, the Shenzhen Intermediate People's Court gave different opinions and opinions from other regional courts in the trial process, and even broke the shackles of the causal relationship determination of the old 03 rule, giving a unique view on the causal relationship determination of the "trap type" False statement behavior.

     The court held that, excluding other factors such as Systemic risk, insider trading and market manipulation in the securities market, the disclosure of good news will generally bring information dividends and cause the rise of the share price of listed companies under the circumstances of no entrapment False statement that conceals information about major profit contents. This will benefit investors who bought stocks and held them until the disclosure date before the positive event should have been disclosed in accordance with the law, while investors who invest in the stocks after the disclosure date will not have this benefit. If the information disclosure obligor conceals or omits the significant positive content information when the positive event occurs, the timing of the announcement of the positive news will directly affect the market trend and investor judgment, and the interests of the aforementioned investors will be affected accordingly.

       The court summarized the possible investment behavior of investors during this period, as well as the causal relationship between this behavior and False statement behavior, into six situations: 1. Investors who held shares before the implementation date of False statement behavior and sold shares before the implementation date of False statement behavior, their investment behavior was apparently not affected by False statement behavior, and there was no causal relationship with False statement behavior, even if there were losses; 2. Investors who hold shares before the implementation date of the False statement and sell shares after the implementation date of the False statement and before the disclosure date (disclosure date or correction date, the same below) and suffer losses due to not enjoying the information dividends that they should have enjoyed, so the aforesaid losses of these investors have causal relationship with the False statement, and can require the perpetrator to compensate; 3. Investors who hold shares before the implementation date of the False statement and sell or continue to hold shares after the disclosure date of the False statement have been able to enjoy the news dividend because the time point for the disclosure of good news (although the disclosure is delayed) is in the period of their shareholding. Even if losses occur, they have lost the premise of being able to claim for compensation; 4. Although the investors who bought shares before the implementation date and sold shares during the period revealed that they had suffered losses, from the perspective of buying time, it was later than the time that should have been disclosed, their losses were also caused by the failure of good news to be announced during their shareholding period, which was due to the untimely remedial measures of the False statement actor, and the investors did not enjoy the information dividends they should have enjoyed, thus suffering from interest damage, Therefore, this part of investors can demand compensation from the actor; 5. The stock is bought before the disclosure date after the implementation date, sold or continued to be held after the disclosure date, or continued to be held after the base date, because it has already enjoyed information dividends, even if losses occur, it has no causal relationship with the False statement itself; 6. When buying shares after the disclosure date, because the False statement has become known to the public, investors

3. Defects in this case

In this case, the Shenzhen Intermediate Court chose to face the problem of how to identify the causal relationship of "empty inducement" false statements, and gave its own unique insights, after the introduction of the new regulations in 2022, compared with the new regulations and the opinions of the Rainbow case judge seven years ago, there is still a high degree of convergence, which shows that the case is actually a major breakthrough in judicial practice of securities false statements cases.

However, it is a pity that the Shenzhen Intermediate Court has not yet solved the problem of how to calculate investor losses in this case, resulting in that even if an investor meets the above-mentioned criteria for determining causality, there is still no legal standard for calculating the amount of losses, and the problem of compensation has been solved, but the amount of compensation has not been solved. In the face of investors, the final result is also a loss.

It is also a pity that the opinions of the Shenzhen Intermediate Court on the criteria for determining the causality of the "air-inducing" misrepresentation behavior are just a flash in the pan, and have not been absorbed and adopted by other district courts. We have not seen a single case in which investors who suffered losses as a result of short-bait misrepresentation were successfully compensated.

Since the promulgation of the old regulation in 2003, the "null inducement" false statement behavior of listed companies has become more and more common in the process of judicial practice. The causality determination standard of the old regulation has limited the results of judges' discretion in the trial of "null inducement" false statement behavior cases, and gradually attracted the attention of the Supreme Court. In order to achieve the purpose of further rectifying the securities market, safeguarding the basic rights and interests of investors, and implementing the legislative spirit of the new Securities Law, the Supreme People's Court finally promulgated the Provisions of the Supreme People's Court on Hearing Civil Compensation Cases for False Statements in the Securities Market on January 21, 2022. The criteria for determining causality and calculating investors' losses are put down on paper, which provides guidance for judges to try such cases.

Article 11 of the new regulation stipulates that if the plaintiff can prove the following circumstances, the people's court shall determine that the transaction causality between the plaintiff's investment decision and the false statement is established: (1) the information disclosure obligor has implemented the false statement; (b) the plaintiff deals in securities directly related to the misrepresentation; (C) the plaintiff after the date of implementation of the misrepresentation, the disclosure date or the correction date carried out the corresponding trading behavior, that is, the plaintiff bought the relevant securities in the inducement false statement, or sold the relevant securities in the inducement false statement. In this regulation, two concepts of "inducing multiple types" false statements and "inducing empty types" false statements are clearly proposed, which corrects the mistake that only "inducing multiple types" false statements are included in the scope of compensation in the old regulation. In the third paragraph of the standard for determining causality in transactions, the trading behavior required for determining causality is expanded, and is no longer limited to buying behavior, but includes selling behavior in the trading behavior, so that investors can claim losses caused by listed companies' "short-inducement" misrepresentation behavior.

Secondly, the 22 new regulations separately list the calculation standards for the losses that investors can be compensated for by "short-inducement" misrepresentation behavior. Article 28 of the new regulations stipulates that in the trading market with centralized bidding, the loss of investment balance caused by the plaintiff's misrepresentation to sell relevant stocks shall be calculated in accordance with the following methods: (a) The plaintiff sold after the implementation date, the disclosure date or the correction date, and the stock purchased after the disclosure date or the correction date and before the base date, multiplied by the difference between the average price of the stock purchased and the average price of the stock sold; (b) The plaintiff sold after the implementation date, the disclosure date or the correction date, and the shares not bought back before the base date are multiplied by the difference between the base price and the average price of the shares sold by the number of shares not bought back. On the one hand, this regulation clarifies the calculation method of the losses that investors can claim for "short-inducement" misrepresentation behavior, and on the other hand clarifies the claimable range of investors who have lost losses due to "short-inducement" misrepresentation behavior, that is, investors who buy the stocks involved in the case before the disclosure date and sell the stocks before the disclosure date after the implementation date can qualify for claims. The claimable interval is also the interval where there is a causal relationship between the loss recognized by the Supreme Court and the misrepresentation behavior of listed companies, and there is a high degree of convergence between the interval and the claimable interval of the "short-inducement" misrepresentation behavior given by the Shenzhen People's Court in the Rainbow Precision case. It solves the realistic dilemma that the false statement behavior of "inducement type" can not claim compensation in the past.

With the introduction of the new regulations, investors can claim compensation for the "short-inducement" misrepresentation behavior implemented by listed companies, and also further expand the connotation of misrepresentation behavior. However, the new regulation has not yet solved a prerequisite problem, that is, there is no clear conclusion on whether the information concealed or forged by listed companies is negative information or beneficial information, which kind of misrepresentation behavior should be attributed to, what loss calculation method should be used and the standard for determining causality. The concept of "neutral" misrepresentation even appeared in some court rulings. Taking the Liyuan Fine case tried by Liaoyuan Intermediate Court as an example, in order to increase production capacity, the shareholders of the listed company pledge their equity in exchange for working capital, which is a good thing or a bad thing for the company, there are different interpretations at different stages. In a good situation in the market, such expansion can be understood by investors as good news, in the market gradually shrinking, the aforementioned pledge is negative news. The same pledge over time, the movement of the market will be interpreted as the opposite information. It is still a difficult problem to solve which criteria for determining causality and loss of misrepresentation should be applied when listed companies conceal the above-mentioned information. There is also a question mark over whether "neutral" misrepresentation really exists. The author believes that this will be the theoretical and judicial practice field to be further solved.