To the many desperate shareholders of the Daqing Lianyi, January 15, 2002 sure was a day that allowed them to see a ray of hope.After a nearly-four-month court suspension on hearing cases of individual investors vs listed companies found disseminating false business information, the Supreme People's Court on that day issued a judicial interpretation which said that small and medium shareholders can sue companies which had already been punished by China Securities Regulatory Commission (CSRC) for cooking books.

　　The responses from both the shareholders and the courts were prompt. Ten days after the Supreme People's Court's announcement was made, the intermediate people's court in Northeast China's city of Harbin accepted a case in which three shareholders claimed that they had incurred financial losses due to the false information given by the Shanghai-listed Daqing Lianyi and asked for compensation.

　　The pioneering three, Tang Guirong, Ma Ruizhong and Chu Yuming have also sued the Shenyin and Wanguo Securities Corp. Ltd. and the Harbin accounting firm for their role in the fraud of Daqing Lianyi. The compensation they asked for were nearly 60,000 yuan (US,200), more than 45,000 yuan (US,400) and nearly 40,000 yuan (US,800) respectively.Not very large sums of money, it may seem, but the case in the Harbin court, still waiting to be heard, may very likely become the first in an avalanche of similar cases arising from irregularities in the Chinese stock market in the years to come.

　　Statistics from the CSRC, China's top securities market watchdog, indicate that so far a total of 16 listed companies have been found of disseminating cooked-up information and have been punished. Apart from the Daqing Lianyi, also on this CSRC blacklist were once-securities-market bignames Zhengzhou Baiwen Department Store and the Chengdu-based Hongguang Industrial Holding Corporation.

　　Still more are expected on the way. Though Vice-President of the Supreme People's Court Li Guoguang used a much veiled phrase of ``from time to time'' to describe the occurrence of fraud in information disclosure in the stock market, he candidly admitted that if there were not the precondition that only those companies that have been punished by the CSRC can be brought to court, the caseload would be too much for the nation's judges to handle.

　　Apart from the 16 already on the list, there are also a handful of misbehaving companies ready to fall under the target of the Supreme People's Court's judicial interpretation soon, including the much-talked-about floppy-disc-maker-turned-biochemical producer the Guangxia (Yinchuan) Industry Co.. The lack of the CSRC punishment has so far saved the company from being sent to court after attempts were stopped last September in Shanghai and Wuxi, Jiangsu Province under a Supreme People's Court notice to suspend the trying of such cases.

　　"They (Guangxia shareholders) are determined to carry on with the Supreme People's Court judicial interpretation," said Yan Yiming, lawyer with the Shanghai Allbright Law Firm. Yan, who had represented small investors of the Guangxia company till last September's court suspension, has received requests from nearly 100 shareholders to speak for them in the one week after courts started to accept civil compensation cases in the stock market.

　　"To the 45 million shareholders in China, they are no longer bare in hand," said Yan, hailing the new judicial interpretation.

　　But Yan, like many of the nation's lawyers and law experts, were also critical about the precondition that only listed companies that have been punished by the CSRC can be brought to court.

　　The delay may put the small and medium investors at a disadvantageous position when it came to compensation, according to Yan, explaining that banks will take an upper hand in freezing the companies' assets to redeem the debts they owe, leaving little left for small and medium shareholders when it comes to their turn."It is one thing if the small and medium investors can win the case and another if they can get compensations," said Yan.

　　Li Guoguang with the Supreme People's Court has justified the practice that CSRC's punishment should go before trials, saying that it has saved small and medium investors the trouble to collect evidence, which is usually difficult.

　　But Yan contended that there is not basis in law to back up the Supreme People's Court decision.

　　"According to the General Principles of Civil Law in China, the right of action of the parties should not be based on the precondition of any administrative punishment," said Yan. "As long as the parties have enough evidence that the listed companies have disseminated false information and this has led to their losses, they can file the lawsuits."

　　Jiang Ping, law professor with the China University of Law and Politics agreed. Civil compensation should be paid if mistakes or misconducts of listed companies are proven to be a fact, the investors have good intentions in the stock transaction and there is causation between the mistakes or misconducts of the listed companies and the financial losses of the investors, said Jiang.

　　The court refusal to accept class action may be another barrier imposed on small and medium investors, according to Yan.

　　While the Supreme People's Court held that class action would be difficult to apply because of the variations in stock prices, number of shares and the time of purchase and have a greater chance of causing chaos in the stock market, Yan approached the issue from another perspective.

　　"This sure will lead to the increase in the litigation cost, forcing quite a number of individual shareholders to give up their rights to sue the misbehaving companies," said Yan.

　　Stock market irregularities have started to come under the spotlight in recent years as China's fledgling securities market entering its second decade. Accompanying the public's call for the CSRC to better regulate the securities market, a number of individual investors also started to resort to courts for compensation. Apart from the case against the Guangxia (Yinchuan) Industry Co., some 363 small shareholders of the Shenzhen-listed Yorkpoint Science & Technology, which was caught engaging in institutional price manipulation, filed a class-action suit against the company and also the company price riggers who had netted huge sums of money for themselves but incurred losses for ordinary investors. They demanded 24.6 million yuan (US.98 million) in compensation.

　　The spree was cut short by a Supreme People's Court notice last September, ordering suspension in trying cases involving fraud in information disclosure, price rigging and inside trading in the securities market. The Supreme People's Court later explained that the suspension was a result of the courts' lack of experience in handling such cases and the intention to avoid chaos in the securities market.

　　Though the January 15 judicial interpretation has opened a door to courtroom for individual investors falling victims of the listed companies' fraud in information disclosure, it has still held up lawsuits against companies engaging in price rigging and inside trading, which are also plagues in China's securities market.

　　Li with the Supreme People's Court attributed the continued suspension to the loopholes in current Securities Law, which only held liable for compensations in cases of fraud in information dissemination in clear terms but does not clarify similar responsibilities in price rigging and inside trading.

　　"We will take up and hear various kinds of civil rights violation cases in the securities market without reservation following a maturer market and legal conditions," said Li, declining to give a timetable for new judicial interpretations to come out.

　　It looks like that the maturer legal conditions that Li meant will not take form in a revision of the current Securities Law, though some law experts have criticized it as stressing too much on administrative responsibilities but little on civil liabilities.

　　Li Fei, director of the Research Department of the Legislative Affairs Commission of the Standing Committee of the law-making National People's Congress (NPC), said that the NPC does not have plan to revise the 1999 Securities Law, adding that details for the implementation of the law should be worked out by courts.

　　Despite the differences, one thing seems certain--hope has been pinned on the civil compensation mechanism to serve as a good supervising force over the irregularities in China's problem-plagued securities market.

　　"Only when the victim investors are encouraged to ask for compensation through civil cases will the great number of shareholders take an active part in supervising the securities market," said Supreme People's Court Vice-President Li Guoguang. "No administrative or law-enforcement department is comparable in its role to watch the securities market to the effective supervision from within the market."

　　"The best way to watch the market is for all the individual investors to participate in the supervision by suing irregularities for compensation,"echoed Wang Liming, law professor with the Renmin University of China.