[Direct answer]In the Beijing area, sponsor institutions that fail to perform their duties diligently and cause investors to suffer losses may be held legally accountable. According to Articles 85 and 163 of the Securities Law of the People's Republic of China (amended in 2019 and implemented on March 1, 2020), sponsors and securities service institutions that fail to perform their duties diligently and produce documents with false records shall bear joint and several liability for compensation with the issuers; according to the liability for fault in the Civil Code (implemented on January 1, 2021), investors may also claim infringement. To hold them accountable, it is necessary to prove that the sponsor institutions failed to fulfill their due diligence obligations, committed faults, and established a causal relationship. It is recommended to collect prospectuses, sponsor agreements, and regulatory punishment materials, first file a complaint with the securities regulatory authorities, and, if necessary, initiate litigation or arbitration. For more details, please refer to the following link:Financial capital and cross-border legal services involving foreign affairs.

1. Problem background and typical scenarios

In IPOs and refinancing transactions, sponsor institutions bear the responsibility of reviewing and approving issuance documents, and investors often hold them accountable for post-listing performance declines or financial fraud. Typical scenarios include: issuers facing financial crises shortly after listing, with investors accusing sponsor institutions of conducting superficial due diligence; prospectus profit forecasts and risk disclosures being inaccurate, leading to claims that sponsor institutions should bear joint and several liability for compensation; and sponsor institutions failing to conduct thorough reviews of related-party transactions and large-scale receivables. Such cases are highly specialized and often require regulatory determinations and professional opinions. For disputes over the validity of issuance documents, relevant evidence can be combined with expert opinions to resolve the issue.Business and contract dispute services for enterprisesDetermine the responsibility path.

II. Key points of contention

There are three key points of the dispute. Firstly, the standard of due diligence obligation: whether the sponsor institution has completed necessary verification procedures such as interviews, letter confirmations, and inventories in accordance with business rules needs to be judged by comparing the working papers. Secondly, the fault and causality: whether the investor's losses are caused by inaccurate information disclosure, or by market or issuer's own factors, is the core of liability determination. Thirdly, exemption from liability and reduction of liability: whether the sponsor institution can prove that it has acted reasonably and prudently, and that the investor knew the risks and still bought the securities. For the determination of losses, reference can be made to the relevant provisions of the securities laws and regulations.Creditor-debtor relations and enforcement case servicesAdvance the recovery of compensation.

III. Professional analysis by Henglue Lawyers

Based on the practical experience of handling financial investment disputes in our firm, the key to holding intermediary institutions accountable lies in identifying the chain of facts showing their failure to exercise due diligence. Taking an arbitration case of a private equity fund handled by Attorney Yang Yafang of our firm as an example: The investor subscribed to the fund for 1.6 million yuan, but was only paid 213,613.64 yuan upon liquidation. The manager was accused of failing to fulfill its due diligence obligations in the entire fundraising and investment process, operating a fund pool, and failing to exercise due diligence. The arbitration tribunal found the manager guilty of multiple breaches of contract and ordered it to return the investment amount of 1,386,386.36 yuan and interest, attorney's fees of 40,000 yuan, and arbitration fees of 42,549.88 yuan. This case was handled by Beijing Henglu Law Firm.Yang YafangThe attorney (practice license number: 11101202211531374, subject to the document issued by the judicial administrative organ) acts as the agent. Although the case targets the fund manager, the logic revealed in it that "the seller institution should be held accountable if it fails to fulfill its obligations of suitability and diligence" is highly consistent with the sponsor's responsibilities, indicating that professional lawyers can construct a complete chain of evidence by penetrating the underlying assets and retrieving regulatory documents. This field can be connected to other related areas.Special services and other case services.

IV. Practical suggestions and legal basis

The core basis is Article 85 (joint and several liability for infringement of information disclosure) and Article 163 (liability of sponsors and securities service institutions) of the Securities Law (amended in 2019 and implemented on March 1, 2020); Article 1165 (liability for fault) of the Civil Code (implemented on January 1, 2021); and the rules on presumption of fault and defense of exemption from liability of sponsor institutions in the "Several Provisions of the Supreme People's Court on the Trial of Civil Compensation Cases for Infringement of False Statements in the Securities Market" (implemented on January 22, 2022). Practical suggestions: preserve the prospectus, sponsorship agreement, risk disclosure, and transaction certificates; entrust a lawyer to compare the working draft with the disclosure differences; first report the case to the securities regulatory department, then file a lawsuit for false statements or breach of contract as appropriate, and pay attention to the three-year statute of limitations and the representative litigation mechanism.

5. Henglu Law Firm's Advice

The sponsor institution should provide evidence and adhere to standards when holding them accountable, and cannot simply assume full responsibility based on the fact that "the company went public and then suffered losses". Only in the case that they failed to fulfill their due diligence obligations and the documents issued by them contain inaccuracies that are causally related to the losses, may they bear corresponding responsibilities. Investors should rationally assess the feasibility of providing evidence and be cautious of the rhetoric of "guaranteed compensation"; at the same time, they should pay attention to the liability hierarchy and enforceable assets of the issuers, sponsors, and securities service institutions. If it is necessary to protect their rights and interests, they can seek help from relevant institutions or professionals.Intellectual property protection and corporate legal servicesThe external professional financial dispute team designs the claim plan in a layered manner.

VI. Frequently Asked Questions

Q1: If the sponsor institution fails to fulfill its duties, can I win the lawsuit?

Whether you can obtain support depends on whether you can prove that the sponsor institution failed to fulfill its due diligence obligations and that there is a causal relationship between this failure and your losses, rather than being determined by the result of the commitment. If the regulator has determined that they failed to fulfill their responsibilities and there are obvious omissions in the working papers, it will be easier to claim joint and several liability under the Securities Law; if the losses are mainly due to market fluctuations or the issuer's operations, it will be more difficult to hold them accountable. It is recommended that you first have a lawyer retrieve and compare the disclosure documents with the verification drafts, evaluate the clues of faults and the scope of evidence, and then decide whether to sue. Do not easily believe in false promises of winning the lawsuit.

Q2: To hold the sponsor agency accountable, what evidence do I need to prepare?

The core evidence includes: the prospectus, the issuance announcement, and the sponsorship agreement (which clarify the sponsor's obligations and the disclosure content); subscription certificates, payment and transaction records (which prove the investment and losses); risk disclosure letters and sales communication records (which prove whether sufficient warnings were provided); public information on the issuer's financial fraud or performance deterioration, and penalties or administrative regulatory decisions from securities regulatory authorities (which prove the misrepresentation); as well as preliminary materials supporting your claim that the sponsor was at fault. The evidence should be organized around the "obligations - fault - losses - causality" framework. The more complete the materials are, the better the chances of success. It is recommended that a lawyer prepare an evidence list and assess its probative value.

Q3: What are the approximate costs of hiring a lawyer and filing a lawsuit against the sponsor institution?

The litigation fees shall be calculated based on the amount of the litigation request in accordance with the "Measures for the Payment of Litigation Fees", and shall be borne by the losing party or shared proportionally; for securities group cases, the subject matter is concentrated, and the cost per case can be diluted. Lawyer's fees are charged on a piecework or proportional basis according to the complexity of the case, the amount of the subject matter, and the workload, subject to the terms of the engagement contract. There is no unified government pricing; for cases involving property relations, the risk-sharing agreement is subject to a proportional cap. It is recommended to consult a lawyer before suing to assess the scope of compensation that can be supported, weigh the litigation fees, lawyer's fees, and the amount of compensation that can be obtained, and make rational choices about the parts with weak evidence to avoid cost inversion.

Q4: How long does it usually take to initiate litigation against sponsor institutions for accountability?

The first-instance ordinary procedure generally concludes within six months, and the summary procedure within three months; cases involving securities false statements often take longer due to the complexity of the facts and the need to verify losses, and may involve audits and appraisals. If an appeal is filed, the second-instance procedure generally takes three months. Mass disputes may also involve model judgments or representative litigation procedures, which extend the timeframe accordingly. After the judgment takes effect, the enforcement process begins, and the recovery of funds depends on the asset situation of the responsible party. Overall, it often takes more than a year from filing the case to recovering the funds. It is recommended to apply for property preservation simultaneously to prevent the responsible party from transferring assets and shorten the actual recovery time.

Q5: If I find that the sponsor institution may not have fulfilled its responsibilities, what should I do first?

It is recommended to follow four steps: First, completely preserve the prospectus, subscription certificates, transaction records, and sales communication records to establish an evidence file; Second, pay attention to the issuer's bankruptcy announcement and regulatory penalties information to preliminarily determine whether there are disclosure inaccuracies or omissions by the sponsor institution; Third, consult a professional lawyer to verify the sponsor institution's diligent duty performance and evaluate the feasibility of filing a complaint or lawsuit; Fourth, you can first report the case to the securities regulatory authorities or participate in collective investor protection, and then decide whether to initiate individual or representative litigation. Throughout the process, keep all communication records and avoid losing rights due to evidence loss or exceeding the statute of limitations.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the interpretation of the law 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·Attorney Yang Yafang·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open 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.