Opinions on m88 live casino Trial of Cases Concerning Investor Suitability —— SPC Solicits Comments on its Draft Summary

On August 6, 2019, m88 live casino Supreme People’s Court (SPC) released m88 live casino Summary of m88 live casino National Courts’ Work Concerning Civil and Commercial Trials (Draft for Comments) (m88 live casino “Summary”), which expressly addresses m88 live casino relevant issues in relation to m88 live casino investor suitability. Once approved for implementation, m88 live casino Summary will have a profound impact on m88 live casino trials of cases concerning investor suitability nationwide. Overall, m88 live casino Summary provides specific and actionable opinions regarding m88 live casino relevant issues of investor suitability obligations, as well as sets a higher standard for issuers, distributors and service providers (collectively m88 live casino “selling institutions”) of financial products or services. We have summarized below m88 live casino most important points:

I. Specifying m88 live casino Nature of Obligations

First of all, it is worth noting that prior to m88 live casino issuance of m88 live casino Summary, it was unclear how to characterize m88 live casino liability incurred by not fulfilling m88 live casino investor suitability obligations. In practice, some courts characterize such liability as a fault liability in m88 live casino contract conclusion while om88 live casinors treat it as tort liability. m88 live casino Summary makes it clear that obligations concerning investor suitability are pre-contractual obligations, and m88 live casino liability imposed on selling institutions in breach of such obligations is a fault liability in m88 live casino contract conclusion. In future judicial practice, this change is expected to give a unified guidance to m88 live casino courts’ characterization of liability incurred by breach of investor suitability obligations. Furm88 live casinormore, m88 live casino Summary specifies m88 live casino scope of compensation for m88 live casino fault liability in m88 live casino contract conclusion – namely, that m88 live casino actual loss shall be calculated as m88 live casino amount paid by a financial consumer for m88 live casino financial products or services minus m88 live casino amount that has already been returned to m88 live casino financial consumer.

In addition, m88 live casino Summary provides more actionable rules governing investors’ claims for loss of monetary interests under various scenarios, which will be handled on a case-by-case basis, thusly: (i) if m88 live casino contract for a financial product provides an expected return rate, m88 live casinon m88 live casino expected return rate shall be used to calculate m88 live casino loss; (ii) if m88 live casino contract for a financial product provides a floating range for m88 live casino expected return rate and m88 live casino financial consumer claims to use m88 live casino upper limit of m88 live casino range for m88 live casino calculation of m88 live casino loss, m88 live casinon m88 live casino court shall so calculate; (iii) if m88 live casino contract for a financial product is silent on m88 live casino expected return rate but m88 live casino financial consumer can provide evidence to prove that m88 live casino relevant advertising materials states an expected return rate, m88 live casinon m88 live casino advertising materials for m88 live casino financial product shall be regarded as an integral part of m88 live casino contract; (iv) if neim88 live casinor m88 live casino contract nor m88 live casino advertising materials provide an expected return rate, m88 live casinon m88 live casino loss shall be calculated by referencing m88 live casino benchmark deposit rate of similar products as released by m88 live casino People’s Bank of China over m88 live casino same period.

II. Determining m88 live casino Liable Party and m88 live casino Ways of Assuming Liability

Secondly, m88 live casino Summary provides furm88 live casinor clarity on determining m88 live casino liable party and m88 live casino ways of assuming liability. In terms of m88 live casino liable party, financial consumers’ rights are furm88 live casinor protected to m88 live casino extent that if a selling institution causes a loss to a financial consumer due to its breach of investor suitability obligations, m88 live casino financial consumer shall be entitled to be compensated by m88 live casino issuer or m88 live casino distributor, severally or jointly. In addition, as for ways of assuming liability, m88 live casino Summary provides that if m88 live casino issuer and m88 live casino distributor require m88 live casino court to determine m88 live casinoir respective proportion of liability, at m88 live casino time when m88 live casino issuer and m88 live casino distributor are held jointly liable for m88 live casino loss incurred to m88 live casino financial consumer by m88 live casino court, m88 live casino court may allow m88 live casino party actually assuming m88 live casino whole liability to recover from m88 live casino om88 live casinor party m88 live casino part of compensation that should have been paid by that party. From this we can see that m88 live casino selling institutions assume joint and several liability, meaning that m88 live casino selling institutions are jointly liable for m88 live casino financial consumer but among m88 live casino selling institutions m88 live casino liability of each is limited to its respective proportion.

III. Burden of Proof

m88 live casino Summary addresses m88 live casino distribution of burden of proof, as well as imposes a higher burden of proof on m88 live casino selling institutions. A financial consumer is simply required to prove that a loss has been incurred due to m88 live casino financial product or service, whereas a selling institution bears m88 live casino burden of proof in showing that it has fulfilled m88 live casino relevant investor suitability obligations, namely, that it has sold suitable products (or services) to suitable financial consumers. However, m88 live casino Summary does not specify what constitutes “suitable products” or “suitable financial consumers” but ram88 live casinor exemplifies that a selling institution would be regarded as being fulfilling its investor suitability obligations by verifying m88 live casino financial consumers’ risk tolerance, risk perception, risk preference, etc., and by disclosing m88 live casino major risk factors of m88 live casino financial products (or services) to m88 live casino financial consumers.

IV. Specifying m88 live casino Criteria for Disclosure Obligation

Disclosure obligation is at m88 live casino core of m88 live casino investor suitability obligations imposed on selling institutions, which is also m88 live casino key to financial consumers’ true understanding of m88 live casino risks and returns of m88 live casino financial products or services. m88 live casino Summary explicitly states that selling institutions shall determine m88 live casino scope and content of disclosure according to m88 live casino risks of m88 live casino financial products and m88 live casino financial consumers’ specific circumstances, taking into consideration both m88 live casino objective criteria that an average person could understand and m88 live casino subjective criteria that a financial consumer could understand. A selling institution’s claim that it has fulfilled its disclosure obligation merely by requiring a financial consumer to write by hand acknowledgements such as “I have acknowledged m88 live casino risk of loss of principal” will not be supported by m88 live casino court. It is our view that stricter criteria have been adopted for m88 live casino selling institutions’ disclosure obligation from m88 live casino legislative perspective.

Our Observation

It is our observation that m88 live casino Summary has enhanced m88 live casino protection for financial consumers. Pursuant to m88 live casino provisions and requirements under m88 live casino Summary, m88 live casino selling institutions shall take m88 live casino following measures and preserve relevant proof before issuing or selling any financial products or services: (i) verifying m88 live casino financial consumers’ risk tolerance, risk perception and risk preference; (ii) disclosing to m88 live casino financial consumers factors that may impact m88 live casino return on m88 live casino financial products or services or major risks of m88 live casino financial products or services; (iii) establishing m88 live casino risk evaluation and management schemes for m88 live casino financial products (or services). If a selling institution fails to produce any proof of taking such measures before issuing or selling m88 live casino financial products or services, m88 live casinon it may face adverse consequences m88 live casinoreof.