Recently, the Beijing Financial Court released a "Golden Classic Case" titled: "Where a Violation of the Appropriateness Obligation Does Not Affect an Investor's Independent Investment Decision, the Selling Institution is Not Liable for Investment Losses". The case was handled by Llinks lawyers and went through first instance, second instance, and retrial, ultimately helping the client avoid all liability for compensation.
This is an exceptionally rare case in judicial practice where, despite the court's finding that the manager failed to fulfill its appropriateness obligation, the manager was fully exempted from liability for compensation based on Article 78 of the Minutes of the National Courts' Civil and Commercial Trial Work Conference (the " Ninth Conference Minutes"). In this case, the Beijing Financial Court clarified that "seller's due diligence" is the prerequisite for "buyer's responsibility," but a seller's failure to fulfill its duty does not necessarily lead to the conclusion that the buyer bears no risk. This judgment avoids the trend in judicial practice of indiscriminately expanding or generalizing the liability of selling institutions.
The trial of this case further clarifies the boundary between a selling institution's liability for failing to fulfill appropriateness obligations and a sophisticated investor's self-assumption of market risks. It serves to supervise selling institutions in earnestly fulfilling their appropriateness obligations while actively guiding investors toward prudent decision-making. At the same time, this case broadens the understanding and application of the principle of "seller's due diligence, buyer's responsibility," and will undoubtedly play a positive role in promoting the healthy development of financial markets. Llinks looks forward to continuing its positive interaction with the judiciary to contribute further to the legal environment of the financial markets.
Llinks Engagement Team
Peiming Yang, Partner
Jason Zhang, Partner
Vivien Zhou, Associate
