(Yicai Global) Aug. 3 -- China’s new class action regime allows aggrieved investors to team up and entrust their class actions to quasi-governmental investor defense organizations to ram home their rights.

A new regulation now affords small and medium investors whose rights have been infringed resort to convenient and low-cost channels to safeguard their interests. Either of the two organizations named in the new rule may now go to bat on their behalf after receiving entrustments from 50 or more injured investors.

These investor guardian angels are the China Securities Investor Services Center and China Securities Investor Protection Fund. The Supreme People’s Court of China issued the corresponding regulation on July 31, which took effect the same day.

The court can revoke their proxy standing upon application by the investors if these representatives are unable to faithfully perform their duties. A court may also exempt these entities from the need to pay a bond when they lodge an application for a pre-judgment attachment of property, the regulation also mandates.

China’s securities market now has 167 million investors, 95 percent of whom are smaller players, data show. Many of these tend to forego lawsuits when they fall victim to illicit acts and other infringements because of their diffused investment and the relatively slight sums often involved. The class action regime was first proposed in the new version of the Securities Law that took effect from March 1 to redress this issue, but no law at that time advised as to how to implement such a scheme. This regulation thus fills this gap.

The new rule seeks to give the law teeth, truly protect investors’ legal rights and interests, lower the costs of them safeguarding their rights, improve listed companies’ management structures and increase their quality, while preserving the capital market’s health, stability and ecology, the Supreme People’s Court noted.

Editor: Ben Armour