On December 4, Citic Securities Company Limited (600030.SH) disclosed in a board announcement that its subsidiary Citic Securities South China Co., Ltd. is involved in a securities misrepresentation lawsuit related to Dongxu Optoelectronic Technology Co., Ltd. The Hebei High People's Court has issued a final ruling, rejecting the reconsideration applications from Citic Securities South China and other parties, confirming the case will proceed under ordinary representative litigation procedures. Currently, 11 investors are participating as plaintiffs, with total claims amounting to 1,828,167.34 yuan.
The case stems from South China Co.'s role as lead underwriter for Dongxu's 2017 private share placement, prior to Citic Securities' acquisition of Guangzhou Securities (South China Co.'s predecessor). Citic Securities stated it had fully accounted for potential losses during the acquisition, expecting no material impact on current or future profits.
The litigation centers on Dongxu's alleged information disclosure violations. According to court documents, Dongxu stands accused of false statements and material omissions in annual reports from 2015-2022, fraudulent issuance in its 2017 private placement, and failure to disclose its 2023 annual report on time. The company received a preliminary administrative penalty notice from the Hebei CSRC on March 28, 2025, prompting investor claims.
Citic Securities South China, named among 37 defendants, faces allegations of violating the 2014 Securities Law by failing to exercise due diligence as lead underwriter. Key procedural milestones include: - April 2025: Receipt of litigation materials - August 2025: Shijiazhuang Intermediate Court's ruling for representative litigation - December 3, 2025: Hebei High Court's final confirmation of the litigation scope
The eligible claimant window covers investors who purchased Dongxu shares between February 15, 2016 and July 5, 2024, and held positions after market close on July 5, 2024. This representative litigation mechanism, introduced under China's revised Securities Law, enables efficient collective resolution of similar claims.
Citic Securities emphasized the historical nature of the case, noting all related risks were priced into its 2020 acquisition of Guangzhou Securities. The company confirmed no other material undisclosed litigations exist.
While current claims total approximately 1.83 million yuan, the final participation scale remains uncertain under the representative litigation framework. The case highlights regulators' increasing emphasis on intermediaries' gatekeeper responsibilities, with securities firms, accounting firms, and law firms facing growing liability exposure for professional services.
Data from a Beijing Financial Court report shows securities disputes accounted for 44.47% of civil cases between March 2021-August 2025, with defendants increasingly including controlling shareholders, executives, and various intermediaries. The Dongxu case exemplifies this expanding liability chain, particularly concerning delisted companies where investors target deep-pocketed service providers.
Practical challenges persist in such cases, including evidentiary burdens, causation complexities, and lengthy enforcement processes. The outcome will test the effectiveness of China's securities compensation mechanisms in addressing historical violations while balancing investor protection with market stability.
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