Viewpoint... The criteria for determining the material nature of information in the information disclosure system.

Published:

2022-08-16

Introduction: In this paper, under the background of civil cases of securities misrepresentation, this paper studies the criteria for determining the material nature of information in the information disclosure system. The author thinks that its information importance is the cornerstone of the information disclosure system and the scope of compensation in civil cases of securities misrepresentation. The author thinks that the criterion of information materiality should be measured by the price fluctuation in the securities market. The essence of the securities market is an information intersection, all kinds of information is full of it, the timely, symmetrical, complete and true information is the basis for investors to invest, but also the key to maintain the smooth operation of the securities market. Investors in the securities market, as passive recipients of information, have led to a weak position relative to listed companies. Therefore, it is particularly important to put the information under supervision and provide for the relevant disclosure system. In December 2002, the Supreme People's Court promulgated the "Several Provisions of the Supreme People's Court on the Trial of Civil Compensation Cases Caused by False Statements in the Securities Market" (hereinafter referred to as "Several Provisions"), which marked the formal adoption of civil compensation in China to force listed companies to have good faith experience and strictly abide by the information disclosure system. A "false statement" in the Black's Law Dictionary means "the act of a person expressing to another person, verbally or otherwise, that the situation is inconsistent with the true facts; an untrue expression of the facts; an incorrect or false statement that, if accepted by another person, would lead to an understanding of a particular situation that deviates from the true facts." The "false statement behavior" in the securities market is a normative legal concept set for the relevant listed companies to fulfill the information disclosure obligations stipulated in laws and regulations and other documents. That is, Article 17 of the "Several Provisions" defines the false statement of securities as "the false statement of the securities market", which refers to the information disclosure obligor's violation of the securities laws and regulations, In the process of securities issuance or trading, make false records and misleading statements against the truth of major events, or material omissions or improper disclosure of information at the time of disclosure." Among them, the law emphasizes that major matters should be comprehensively determined as significant in combination with articles 59, 60, 61, 62, 72 and other relevant provisions of the Securities Law. In addition, this article defines the above four behaviors. First, false records simply refer to making something out of nothing; second, misleading statements refer to the release of wrong information to interfere with normal information and affect investors' judgment; third, major omissions refer to the lack of disclosure without disclosure; fourth, improper disclosure is actually a bottom-up clause, which mainly includes two types, one is not disclosed in a legal manner, the other is the wrong time period disclosure. Thus, the Certain Provisions provide for four cases of misrepresentation in the securities market, which we can summarize as fabrication, omission, misleading disclosure and inappropriate disclosure. However, these four acts have a common premise, or for those with disclosure obligations, the need to disclose information involving material matters in accordance with legal procedures in a timely and compliant manner, so it can be understood that information containing material events of the obligor is significant, and such information is the cornerstone of the information disclosure system. As mentioned above, the essence of the securities market is an information meeting place, and all kinds of information are full of it. If the listed company discloses all the information of the company, this practice is obviously unrealistic, which violates the original intention of the legislation on the information disclosure system. It can not achieve the role of standardizing corporate behavior and will cause a huge burden to the company, thus affecting the normal operation of the company. From the investor's point of view, the aggregation of information will also make it difficult for investors to identify effective information, thus missing the best time to invest, resulting in the loss of vitality of the securities market, so it is particularly important to disclose what information needs to be disclosed. So what information needs to be disclosed, the core is to combine the problems in practice and the legislative intent of the information disclosure system to specify a standard to distinguish all information. According to Article 17 of the "Several Provisions", "For major events, it shall be determined in conjunction with Articles 59, 60, 61, 62, 72 and related provisions of the Securities Law." As well as the Supreme People's Court on a number of specific issues in the current commercial trial work, the emphasis on the entity trial to correctly understand the constituent elements of civil liability for securities infringement. It is necessary to study the significance of securities cases, including behavior, fault, result and causality, with the constituent elements of traditional civil tort cases. Wherein, it is clearly stated that "it refers to the possible impact of the illegal act on the investor's decision, and its main measurement index can be judged by the impact of the illegal act on the price and volume of securities trading. The significance and transaction causality are institutional arrangements to limit or reduce the liability of the actor. When the tort is not material or the tort is not causally related to the investor's transaction decision, the actor shall not be liable for compensation." The author notes that in Article 17 of the Certain Provisions, it is mentioned that it should be determined in combination with the relevant provisions of the Securities Law. Can such a statement be understood as that the relevant provisions of the Securities Law are only used as a reference, and the concept of material information is actually more extensive. In addition, the Supreme People's Court on a number of specific issues in the current commercial trial work is also too broad a statement that the importance of the decision to be judged by the ability to influence investors. The author believes that the key to the information disclosure system of the securities market lies in the identification of the importance of information. The reason why the relevant laws and regulations are relatively broad, in addition to the abstract characteristics of the material information itself, the more important influence investors make decisions on the basis of reference The items are too extensive, and the angles and methods that investors consider are also very different, so it is difficult to standardize the importance. The criteria for determining the importance of information are so abstract, so how do foreign countries do it, or in other words, can we learn from the standards of other countries to find commonalities and provide us with ideas? When it comes to the identification of major issues in the U.S. securities market, it is bound to mention its TSC case and Basic case, the specific facts of the two cases I will not introduce in detail here, but based on these two cases there are two criteria for identification. That is, the TSC standard, also known as "investor decision-making", means that the importance depends on the rational investor being influenced by the information. The Basic standard, on the other hand, raises the threshold for identification on the basis of the TSC, where rational investors are judged by a significant image of information against existing information. Similar to the United States, Japan is also Japan. Article 5, paragraph 1, of the Financial Commodities Exchange Law of Japan stipulates that "material nature may have an important impact on investors' judgment." There is a significant difference with the above two national identification standards, which is represented by the United Kingdom and focuses on respecting the opinions of professional consultants. Combined with other national identification criteria, although there are many differences, but there is a more unified view of the impact on investment decisions. At present, there are also differences in the material standards of information in China's academic circles, which are summarized well in the book "Research on the Rules of Civil Cases of Securities Misrepresentation" and are mainly divided into three types: the first type affects the decision-making standards of investors, and false information obviously affects the reference information that rational investors originally rely on. The typical representative is "Guidelines for the Content and Format of Information Disclosure by Companies Issuing Securities to the Public No. 1-Prospectus (Revised in 2015)". The second type is the price standard, that is, whether the information has a great impact on the price of securities, which mainly comes from the occurrence of major events that may have a greater impact on the stock trading price of listed companies as emphasized in Article 67 of the Securities Law. When investors have not yet learned about it, listed companies should immediately attach reporting and publicity obligations about the major event; the third is the standard of adverse effects on issuers, that is, whether the matters involved in the information have a material adverse effect on the issuer's operation, financial and other related matters, to determine whether it is material. A typical example is that if the relevant risk factors may have a serious impact on the issuer's production and operation status, financial position and profitability only, a "material matter alert" should be made in the relevant risk alert rules of the prospectus and prospectus ". In addition to the above three views, some scholars have proposed the "rational investor standard", "expert standard" and so on. Combining the views of foreign and Chinese academic circles, we can draw the following conclusions: 1. the current standards for identifying the significance of the information disclosure system in the securities market have not been unified; 2., although the views are not unified, the mainstream views are relatively concentrated. The author thinks that the standard of determination of material importance should be considered from many aspects, but this paper studies the civil compensation of securities misrepresentation as the background. Just as the "Supreme People's Court on Several Specific Issues in Current Commercial Trial Work" emphasizes that the essence of securities misrepresentation is an infringement case. It is an undue bubble generated by the listed company's misrepresentation of material information that causes the stock to be generated for a period of time. The bubble burst due to the disclosure of the facts, resulting in the decline of the stock price and the loss of investors. Therefore, in the investor's claim litigation, there is the burden of proof for the listed company's misrepresentation of material information, even if the CSRC's "political penalty decision" as evidence, but in the entire securities market investors are always in a weak position. Another issue that cannot be ignored in securities misrepresentation cases is time, as the time span from the date of presentation to the date of disclosure to the date of reference is often very long in practice, and the confirmation of such time through material matters can lead to a wide variation in the scope of compensation. As a listed company, it should operate in good faith and truthfully disclose information to provide investors with investment reference. It is obviously unreasonable for investors to pay for the company's own wrong behavior or let investors share the losses. Therefore, the author believes that there should be a certain tendency for investors to confirm the criteria for determining the significance and should not raise the threshold, so as to balance the status of both sides and eliminate the market impact as soon as possible. But the tendency is not one-sided support investors, so it is not conducive to market stability. The author thinks that the criteria for the determination of significance should be considered in combination with other factors, one of which is the definition of misrepresentation, or model. From the definition of the misrepresentation infringement case combined with the real case in practice, the author understands that the scope of compensation is mainly the closed area formed by the real trend of the stock price and the inflated stock price trend, and this closed area is actually the bubble mentioned above. Based on this understanding, it is not difficult to model the case of securities misrepresentation infringement. The author thinks that the ideal model closing point is the false statement date and the reference date. Therefore, it can be found from the model that the criteria for determining the importance of information can be directly reflected in the model, and the model is relatively stable, and the model is drawn according to the trend of the stock price, so the author thinks that the criteria for determining the importance of information should be measured by the change of stock price.

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