[Direct answer]In the Beijing area, if a listed company's financial reports contain false records that cause investors to suffer losses, investors can sue for compensation according to law. According to Article 78 of the Securities Law of the People's Republic of China (effective March 1, 2020), the information disclosed by information disclosure obligors must be true, accurate, and complete. Article 85 further stipulates that if the disclosed information contains false records, misleading statements, or major omissions, causing losses to investors, the obligors shall bear compensation liability according to law. According to the "Several Provisions of the Supreme People's Court on the Trial of Civil Compensation Cases for False Statements in the Securities Market" (effective January 22, 2022), suing is no longer subject to the prerequisite of administrative penalties or criminal judgments. Investors can file lawsuits directly with the courts having jurisdiction over the issuers' registered offices based on transaction records and publicly disclosed documents, and the statute of limitations for suing is three years. It is recommended to first fix the transaction records and relevant announcements, then evaluate the compensation plan, and refer to it for reference.\nCross-border financeColumn.

1. Problem background and typical scenarios

Such lawsuits are common in several situations: first, listed companies artificially inflate their revenue and profits in their annual reports, and after being investigated by regulatory authorities, they correct their financial data; second, after financial fraud is exposed, they are subject to delisting risk warnings, and their share prices fall sharply continuously; third, if the fraud is serious, they are forced to delist, and investors find it difficult to exit their holdings; fourth, in mergers and acquisitions, the target company's performance commitments may involve fictitious transactions; fifth, financial fraud in overseas-listed Chinese stocks may involve cross-border claims, which can be referred to for reference.\nCross-border financeThe column. When investors in the Beijing area initiate similar lawsuits, they usually first sort out whether the implementation date, the disclosure date, and their own trading period match each other, and then determine the list of defendants and the jurisdiction court to avoid flaws in their right to sue.

II. Key points of dispute

Focus One: Whether the false records are of significant importance, which is usually judged based on the proportion of the amount of fraud, regulatory penalties, and the actual impact on the stock price. Focus Two: The determination of the implementation date and the disclosure date directly determines which transactions meet the conditions of causality. Focus Three: The selection of the reference date and reference price affects the calculation of the investment difference loss. Focus Four: The deduction ratio of systemic and non-systemic risks is often the subject of intense disputes between the two parties. Focus Five: The scope of liable parties, in addition to the issuer, may include actual controllers, directors and supervisors, sponsor institutions, and accounting firms, who may bear joint and several liability. Focus Six: After the abolition of the preliminary procedures, investors can submit regulatory measures, inquiry letters, correction announcements, and other auxiliary evidence to prove the fact of fraud. Focus Seven: The statute of limitations is three years, starting from the date when the investor knows or should have known about the false records. Specific determinations shall be based on the currently effective laws, regulations, and judicial rulings. The risk disposal of the companies involved in fraud can be referred to for reference.Business and contract disputes in enterprisesColumn.

III. Professional analysis by Henglue Lawyers

Based on the practical experience of lawyers from our firm in handling securities false statement cases, the key to success lies in transaction matching and loss calculation. In terms of court preferences, the announcement or authoritative media reports that first publicly disclose the fraudulent facts are often taken as evidence. Administrative punishment decisions and criminal judgments are still the most powerful supporting evidence. The commonly used method of calculating losses is the investment difference method, which deducts the impact of fluctuations in the overall market and industry sectors. Common pitfalls include: the purchase time being earlier than the implementation date or later than the reference date, which lacks causality; only suing listed companies while omitting actual controllers and intermediary institutions, which affects the actual repayment ability; failing to timely print account statements stamped with the branch's seal, resulting in missing transaction records; and underestimating the price reaction before and after the disclosure date, which leads to doubts about the calculation of losses. When investors in Beijing file lawsuits, it is recommended that lawyers from our firm first verify the transaction period and disclosure time, then determine the claim strategy and defendant scope. Key points of relevant procedural documents can be referred to for reference.Special services and other casesColumn.

IV. Practical suggestions and legal basis

Action suggestions: 1. Print and save the securities account statements and settlement notices stamped with the branch's official seal to fully reconstruct the transaction; 2. Collect public documents such as the listed company's regular reports, correction announcements, regulatory inquiries, investigation announcements, and punishment decisions; 3. Preliminarily determine whether your purchase occurred between the implementation date and the disclosure date, and whether you held the securities until the reference date; 4. List the issuer, the actual controllers at fault, the directors, supervisors, and senior management, as well as intermediary institutions such as sponsors and accountants, as co-defendants and claim joint compensation; 5. Pay attention to the three-year statute of limitations and file a lawsuit or assert rights in writing to interrupt the statute of limitations as soon as possible. Legal basis: - Article 78 and Article 85 of the *Securities Law of the People's Republic of China* (effective March 1, 2020) establish the obligation of truthful disclosure of information and liability for compensation; - Article 197 of the same law prescribes administrative penalties for false recordkeeping; - The *Supreme People's Court's Several Provisions on the Trial of Civil Compensation Cases for False Statements in the Securities Market* (effective January 22, 2022) refines the rules on materiality, causality, and loss calculation; - Article 1165 of the *Civil Code of the People's Republic of China* (effective January 1, 2021) establishes the general rules of fault-based tort liability. For post-judgment enforcement and asset tracing, refer to the following resources:Creditor's rights and debts, and enforcement casesColumn.

5. Henglu Law Firm's Advice

Risk Alert: Firstly, the abolition of the preliminary procedures does not necessarily mean that compensation will be granted. The materiality and causality of the false records still require solid evidence; Secondly, the determination of the disclosure date has a significant impact on the eligibility for compensation, so it is advisable to preserve the first announcement or report exposing the fraud as soon as possible; Thirdly, the calculation of losses involves the deduction of systemic risks, and reasonable claims can increase the proportion of compensation; Fourthly, some defendants may no longer have the ability to pay, so the list of defendants and clues to their assets should be considered together. It is recommended to seek advice as soon as possible.Beijing Henglue Law FirmOn the official website, in the corresponding column, professional lawyers evaluate the claim window and solutions.

VI. Frequently Asked Questions

Q1: Can I sue someone even if the China Securities Regulatory Commission hasn't imposed any penalties on them?

Yes. According to the "Several Provisions of the Supreme People's Court on the Trial of Civil Compensation Cases for Infringement of Securities Market False Statements" (effective from January 22, 2022), litigation no longer requires an administrative penalty or criminal judgment as a prerequisite. Investors can submit evidence such as the listed company's correction announcement, regulatory inquiry letters, regulatory measures, announcement of investigation into a case, or reports from authoritative media to prove the false records. However, if there are supporting decisions on penalties or criminal judgments, the determination of the facts will be smoother, and the certainty of obtaining compensation will be higher. It is recommended to evaluate the timing of litigation based on the available materials.

Q2: What materials are needed to sue for financial statement fraud?

There are mainly four categories: First, identity and account materials, including identity documents, securities account information, account statements and settlement statements stamped with the branch's seal; Second, materials related to infringement facts, such as periodic reports, correction announcements, administrative punishment decisions, criminal judgments, and regulatory inquiry letters; Third, loss materials, including purchase and sale records, and commissions and stamp duty certificates; Fourth, defendant materials, including the basic information of the issuer and its actual controllers, directors, supervisors, and senior executives, as well as intermediary institutions. The more complete the materials are, the more accurate the loss calculation will be, and the smoother the court's fact-finding process will be.

Q3: How much can I get compensated for a claim of false statements?

The compensation is based on the loss of the investment difference, typically calculated by multiplying the difference between the average purchase price and the benchmark price by the number of shares that can be claimed, plus commissions, stamp duty, and corresponding interest. The court will deduct losses caused by systemic risks in the securities market and other factors unrelated to false records, and the deduction ratio directly affects the final amount received. The amount of compensation in individual cases depends on the transaction timing, holding cost, and deduction situation. It is recommended that professional lawyers or accounting agencies first estimate the expected amount and then decide whether to incur litigation costs.

Q4: How long does it take to file a lawsuit for claims against financial report fraud?

The first-instance ordinary procedure is generally concluded within six months. In batch series cases, the court may first select demonstration cases for trial, and the remaining cases will proceed with mediation or adjudication based on the demonstration judgments. The overall cycle usually ranges from several months to more than a year. If the defendant appeals, the second-instance trial will take about three months. The execution stage depends on the defendant's repayment ability and preservation situation. In Beijing, the court often uses the demonstration judgment mechanism when handling similar series cases. Filing a lawsuit as early as possible and applying for property preservation in a timely manner can help shorten the cycle and ensure effective execution.

Q5: Which entities can be sued for falsifying financial reports?

The defendants are not just listed companies. According to Article 85 of the Securities Law of the People's Republic of China (effective March 1, 2020) and relevant judicial interpretations, the issuer is the primary subject of compensation liability; the actual controllers, directors, supervisors, and senior managers who directly participate in fraud or fail to fulfill their due diligence obligations, as well as intermediary institutions such as sponsors, underwriters, and accounting firms that fail to fulfill their verification and validation obligations, may all bear joint and several compensation liability. Reasonably listing multiple solvent liability subjects is conducive to the actual implementation of compensation and avoids the situation where a judgment is won but the money cannot be collected.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the interpretation of judgments in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Financial capital legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.