On October 12, the Supreme People’s Court, the People’s Bank of China, the State Administration of Financial Regulation and the China Securities Regulatory Commission jointly released six representative cases concerning the protection of the legitimate rights and interests of financial consumers and investors. The release aims to safeguard the legitimate rights and interests of financial consumers and investors, standardize the business conduct of financial institutions, and foster a sound financial legal environment.

The Supreme People’s Court stated that finance is the lifeblood of the national economy, and financial consumers and investors constitute key participants in the financial market. Performing its financial adjudication functions, people’s courts uphold strict and impartial justice, work with regulatory authorities to improve protection mechanisms for financial consumers and investors, and contribute to the development of a strong financial nation.

It is learned that the released cases cover multiple fields including financial lending, fund wealth management, digital finance, life insurance and securities investment. Centering on practical hot-button issues and judicial challenges such as standard clauses, fair transactions, suitability obligations, remedy of rights and diversified dispute resolution, the cases collectively demonstrate the value guidance of financial adjudication for high-quality development of the financial sector, and carry exemplary significance for building a fair, transparent, trustworthy and secure financial market ecosystem.

In terms of strengthening the obligation to explain standard clauses, people’s courts hear financial disputes in accordance with the law by properly handling the dialectical relationship between equal protection and preferential protection, freedom of contract and contractual justice, enabling the public to make truly independent decisions and access financial services on fair terms.

In the released case A Bank v. Pan and Li (Financial Loan Contract Dispute), the people’s court held that interest rate clauses are core provisions of loan contracts. Financial institutions bear the obligation to draw attention to and explain standard clauses for interest rate adjustments, and shall disclose fees and liquidated damages payable by financial consumers in a timely, truthful, accurate and comprehensive manner.

This case embodies the value orientation of protecting financial consumers’ rights to fair transaction and to know in accordance with law.

In respect of enforcing institutional accountability and implementing suitability management and the seller’s due diligence obligation, multiple authorities promote the coordination of financial adjudication and financial supervision, pushing financial institutions to fully perform suitability obligations.

In the two released cases, Su v. A Bank (Entrusted Wealth Management Contract Dispute) and Yang v. A Securities Business Department, with Chen and an Investment Management Center as Third Parties (Financial Entrusted Wealth Management Contract Dispute), the people’s courts legally ruled that sales institutions failed to fulfill suitability obligations in selling financial products and shall bear corresponding compensation liability. The rulings help implement the principle of “sellers fulfill their duties and buyers assume their own risks”, forcing financial institutions to improve internal control and compliance systems and embed consumer rights protection into the whole business process.

In addition, the Supreme People’s Court noted that with advances in digital technology, while financial institutions accelerate the development of tech-enabled financial businesses, they leverage technological advantages to gain the upper hand in financial transactions and dispute resolution, and impose unreasonable terms on financial consumers, which calls for urgent regulation.

In the case Fang v. A Fund Company (Property Damage Compensation Dispute), the people’s court clarified that the fund company’s act of forcibly changing dispute resolution terms after consumers subscribe to products by relying on the technical advantages of its mobile App has no legal effect, demonstrating rigid protection for the legitimate rights of financial consumers.

The Supreme People’s Court emphasized that resolving financial disputes in a diversified, substantive and efficient manner is a shared goal of the judiciary and regulators. In light of the characteristics of financial cases and with support from regulatory authorities, people’s courts adopt a mix of measures including diversified dispute resolution, mediation and reconciliation, model judgments and representative actions to streamline rights-protection procedures, shorten handling timeframes and cut compliance costs. These measures provide convenient, efficient and low-cost dispute-resolution channels for financial consumers and retail investors, achieving sound outcomes.

In the case Wu v. A Life Insurance Company (Life Insurance Contract Dispute), the people’s court conducted mediation in accordance with law, avoiding the lengthy cycle of judicial appraisal and enabling the policyholder to obtain critical illness insurance compensation within a short period. In the case Securities Misrepresentation Liability Dispute involving a Listed Company, the people’s court innovatively combined “model judgment + entrusted mediation + representative action”, leveraging the diversified substantive dispute-resolution mechanism to protect the legitimate rights and interests of numerous retail investors.

Going forward, people’s courts and financial regulators will follow the requirements of advancing the “five major tasks” in finance, deepen government-court coordination, pool joint governance strength, jointly regulate financial service practices, and protect the legitimate rights and interests of financial consumers and investors in accordance with law. They will continue to optimize the financial legal environment, and foster a sound framework featuring compliant operation by institutions, rational consumption by the public, targeted regulatory measures and robust judicial safeguards, so as to bolster high-quality financial development.

Source: Shanghai Securities News