China Sees First Class-Action Lawsuit Against Listed Company

What’s new: A court in the southern Chinese city of Guangzhou accepted a lawsuit brought by a group of private investors through a special envoy against Kangmei Pharmaceutical Co. on charges of fraud. This was the first class action lawsuit against a publicly traded company in China.

The government-backed China Securities Investor Service Center (CSISC) is suing Kangmei on behalf of 56 investors, according to the court document released Friday.

Kangmei, one of the largest publicly traded drug companies in the country, was accused of guilty of exaggerated financial reporting fraud of 88.6 billion yuan ($ 12.6 billion) between 2016 and 2018.

Why it matters: The China Securities Regulatory Commission described the lawsuit as a landmark case in the Chinese capital market in a separate statement.

China introduced the class action mechanism in the capital market last year, offering investors a new channel to seek legal protection from criminal activities such as false testimony, insider trading and market manipulation. Historically, many investors, especially medium and small investors, have had little access to redress after a loss.

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Contact reporter Han Wei (weihan@caixin.com)

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