Investors Suffering Losses with No Way to Claim Compensation? Attorney Chen Yuxia Teaches You How to Protect Your Rights in Three Aspects

Special Topic: Strengthening the Defense Line for the Rights of Small and Medium Investors — Sina Finance 3.15 Investor Protection Forum

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On March 13, Sina Finance held the 3.15 Investor Protection Forum. Lawyer Chen Yuxia from Beijing Yingke (Hangzhou) Law Firm attended and delivered a speech.

When discussing regulation of the capital market, she explained to investors how to protect their rights from three aspects. She also shared her personal experience and insights from “practical” cases involving market manipulation.

She said that China’s capital market has developed for over 30 years, forming a comprehensive accountability system that includes administrative penalties, criminal sanctions, and civil compensation. Among these, civil compensation is most closely related to the interests of small and medium investors. Many investors come to us lawyers concerned about whether they can claim compensation if their stocks crash, how long it will take to receive it, and how much they can get.

She also emphasized that there should be no hesitation in providing compensation to investors. Once investors receive compensation, they are likely to reinvest in the market, increasing liquidity and making the market more prosperous.

Full transcript of her speech:

Chen Yuxia: Good afternoon everyone. I am Lawyer Chen Yuxia from Beijing Yingke (Hangzhou) Law Firm. I am honored to be invited to participate in the Sina Finance 3.15 Investor Protection Forum to discuss issues related to the protection of small and medium investors’ rights. Small and medium investors are important participants in our capital market and the foundation for its healthy development. Today, I want to share some key issues that directly affect their interests from their perspective.

Our capital market has been developing for over 30 years, and a three-in-one accountability system has been established, including administrative penalties, criminal sanctions, and civil compensation. Civil compensation is most relevant and closely tied to the interests of small and medium investors. Many investors who approach us are mainly concerned about whether they can claim damages if their stocks suffer losses, how long it will take to get compensated, and how much they can receive. I will discuss these questions from three aspects.

First, which stocks that have suffered losses are eligible for claims? Currently, the legal framework is quite narrow, mainly limited to cases of securities false statements. Although the Securities Law stipulates three types—false statements, insider trading, and market manipulation—in practice, due to the lack of judicial interpretations, civil compensation cases related to insider trading and market manipulation are very rare. Cases involving market manipulation are few, and insider trading cases are even fewer. So far, perhaps only the mistake made by Everbright Securities’ “Wulong” incident has allowed many investors harmed by insider trading or market manipulation to seek claims.

Last year, I handled a market manipulation case myself, which was very difficult to initiate. After investigation and evidence collection, we learned that the defendant had been criminally detained by public security authorities and was undergoing criminal trial, yet the case could not be filed. Such cases are very challenging under current law. However, there is good news: during the recent Two Sessions, Gao Xiaoli, Vice President of the Supreme Court, stated in an interview that the Supreme Court will accelerate the drafting of judicial interpretations on civil compensation for insider trading and market manipulation, aiming to release them within the year. This is very encouraging for us, and we look forward to the implementation of these interpretations to bring new hope for investor rights protection.

Second, how long does it take for investors to receive compensation? This concerns the litigation cycle for securities false statement cases. Currently, the process is quite lengthy, with most cases taking over three, four, or even five years.

First, filing such cases is difficult. Many lawsuits are rejected outright by courts. Courts may have their reasons, but often they do not communicate these reasons clearly. Some cases are dismissed due to jurisdiction issues—when multiple offices or different registration and actual business locations create conflicts, jurisdiction becomes problematic. Only a few provinces can handle securities false statement cases, and cross-provincial cases often require the Supreme Court to designate jurisdiction, causing delays.

Many cases are also delayed because courts adopt a model of precedent-based judgments. Nearly all courts handling securities false statement cases use this approach, which reduces initial pressure. They first hear a case, but must strictly adhere to time limits, often taking one or two years, sometimes even three. Once a precedent is established, parallel cases may still not be resolved within the time limit. Interestingly, securities false statement cases seem not to be subject to the six-month statutory limit under the Civil Procedure Law, yet many cases drag on for one, two, or even three years. I understand courts handle thousands of such cases, which takes time, but some delays are excessive and cannot be justified by volume alone.

I handled a particularly extreme case that started trial at the end of 2023 and still has no judgment as of March 2026. I hope the Supreme Court will issue procedural guidelines clarifying filing, jurisdiction, time limits, and trial procedures to better protect investors’ litigation rights.

Third, regarding the compensation ratio in securities false statement cases: many cases now face declining compensation rates. The old judicial interpretation set damages based on the difference loss minus systemic risk. The new interpretation requires deducting both systemic and non-systemic risks, reducing the payout to 50-60% of the difference loss, sometimes even less. For example, most cases in Hangzhou Intermediate Court are awarded only 50%, based on discretion. Additionally, after the new interpretation, courts often hire third-party agencies to assess losses. If the agency is affiliated with the Securities Investment Fund Association, the calculation is more objective; otherwise, it’s like opening a blind box, often resulting in very low estimates. This is problematic because judicial decisions should not be influenced by commercial entities with opaque models and potential conflicts of interest. They lack proper qualifications, and their risk assessment methods are unscientific—no one can accurately predict stock prices or determine systemic and non-systemic risks reliably. I believe compensation should not be tied to risk factors but rather to the severity of the issuer’s misconduct, with a penalty coefficient that can be less than or greater than 1, reflecting the gravity of the violation. This approach aligns with the principle of proportionate punishment and can boost small and medium investors’ confidence in the market.

Finally, do not be stingy with investor compensation. Once investors receive compensation, they are likely to reinvest, increasing market liquidity and fostering greater market prosperity.

(Sina’s statement: The above speech transcript has not been reviewed by the author. Sina.com publishes this article to disseminate more information and does not necessarily endorse or verify the views expressed. The content is for reference only and does not constitute investment advice. Investors operate at their own risk.)

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Editor: Liu Wanli SF014