A Study On The Transaction Causation Of Corporate Bond Misrepresentation Disputes

Since the second half of 2018,under the influence of macroeconomic situation and multiple factors of internal and external environment,default events in China’s bond market have shown a concentrated outbreak trend.By the end of December 2019,the total number of bond defaults was 187,with the default amount exceeding 144.9 billion RMB.Behind this,many listed companies broke out scandals such as financial fraud,annual report fraud,false content of the prospectus of bond issuance,etc.Fraudulent issuance and misrepresentation events in corporate bond market such as "Wuyang bonds" false statements and fraudulent issuance,"14 Jiliang bonds" and "Stdawee bonds" private bond fraudulent issuance also emerged in an endless stream.The number of lawsuits that investors filed civil compensation lawsuits for bond misrepresentation has increased significantly.In 2003,the Supreme People’s Court of China promulgated the Several Provisions of the Supreme People’s Court on the Trial of Civil Compensation Cases Caused by Misrepresentation,which regulates the issues related to the dispute of security misrepresentation with model of stock market,while obstacles came up in the application on bonds.At the end of 2019,the Supreme People’s Court issued the Forum Summary of National Courts’ Hearing regarding Bond Disputes.Article 23 stipulates the determination of loss causation of bond misrepresentation disputes,without determination of transaction causation.In light of this,this paper intends to explore the special identification of the transaction causation in the bond misrepresentation disputes.In the first part,this paper introduces the concept of corporate bond misrepresentation and transaction causation.In the concept of misrepresentation of corporate bonds,this paper compares the corporate bonds and stocks,and summarizes the characteristics of the relationship between information disclosure and the value of corporate bonds;in the concept of transaction causation,this paper leads to two related concepts of transaction causation concept,i.e.reliance presumption principle and fraudon-the-market theory.In the second part,this paper summarizes the current situation of transaction causation identification of corporate bond misrepresentation disputes in China,including the current relevant provisions and judicial practice.In judicial practice,since there is only one relevant case of corporate bond that can be inquired publicly,this paper also enumerates the commonly-considered elements of transaction causation in judicial practice of stock disputes.This paper further combines the relevant provisions and judicial practice,with the characteristics of corporate bonds in the first part of this paper,and put forward the existing problems of the transaction causation identification of corporate bond misrepresentation disputes in China.In the third part,this paper studies the theoretical basis of transaction causation presumption under securities law of United States,which is the birthplace of causation presumption in security fraud disputes,i.e.evolution and financial theoretical basis of fraud-on-the-market theory.This paper also takes relevant cases as examples,to summarize the basic ideas of application of fraud-on-the-market theory to the corporate bond misrepresentation disputes of the United States.In the fourth part,based on the characteristics of corporate bonds,the judicial practice of stock misrepresentation disputes in China and the experience of corporate bond misrepresentation disputes in the United States,this paper puts forward suggestions to construction of rule of transaction causation of corporate bond misrepresentation disputes.This paper considers that: Firstly,it should specifically distinguish transaction causation and loss causation in relevant regulations.Secondly,as for theoretical basis and specific application,this paper considers that for theoretical basis,the theoretical basis of transaction causation presumption should not be the fraudon-the-market theory originated from financial theories with application dilemma and inherent defects,but should be based on consideration of legal theories;for specific application,reliance presumption principle should be applicable to qualified investors of corporate bonds and inapplicable to public investors.Thirdly,it should distinguish different types of reliance,in order to set transaction causation defenses of misrepresentation actors under transaction causation presumption.This paper in the end tries to summarize suggestions to construction of rule of transaction causation of corporate bond misrepresentation disputes.