Reflection and Reconstruction of the Case Selection Mechanism for Securities Special Representative Litigation

The “Securities Law” stipulates that investor protection institutions “may” participate in litigation in the capacity of a special representative, granting investor protection institutions the procedural option to initiate special representative litigation; the China Securities Regulatory Commission has preliminarily defined the scope of case selection and fully delegated the substantive case selection authority to the Investor Service Center. However, in the case selection rules formulated by the Investor Service Center, the listing of specific situations is mixed with catch-all provisions, the application logic is ambiguous, the listed scenarios are broadly worded, and the self-empowerment lacks boundaries, failing to effectively distinguish them from ordinary representative litigation. At its root, the functional positioning of special representative litigation is not yet clear, as it has the dual effects of safeguarding the public interest in securities and realizing private rights; the role positioning of the Investor Service Center as a statutory public welfare organization is not clear enough. While attempting to exert private law enforcement effectiveness, it actually undertakes public law enforcement functions and lacks corresponding incentives and external checks and balances mechanisms. Restructuring the case selection mechanism for special representative litigation should establish a selection principle centered on “safeguarding the securities public interest” and determine the criteria for judging damages to the securities public interest. Clarify the case selection rules of the Investor Service Center, with the general principle of meeting three specific situations simultaneously, and the exception of the catch-all provisions, and provide clear and detailed standards for the application of these two types of situations. Give full play to the private law enforcement effectiveness of the Investor Service Center, ensure the independent exercise of the right to choose cases, appropriately expand the scope of eligible investor protection institutions, strengthen the honor incentives of the Investor Service Center and reduce its litigation costs, and establish a collaborative supervision system where administrative agencies are responsible for the supervision of case selection behavior and work discipline, and judicial agencies are responsible for the substantive review of case selection rights.