A Study on Proportional Joint and Several Liability of Securities Service Institutions in Cases of Misrepresentation

Abstract

Under the 2019 registration-based reform, Article 163 of the Securities Law requires securities service institutions to assume rigid joint and several liability for misrepresentation. However, judicial practice is shifting toward proportional joint and several liability. This paper aims to explore the theoretical basis and application pathways for securities service institutions to bear proportional joint and several liability. By analyzing typical court cases where securities service institutions were held liable for full joint and several liability versus proportional joint and several liability, it reveals a divergence in judicial decisions: traditional full joint and several liability overlooks differences in fault, whereas proportional joint and several liability, based on the theory of non-collusive tortfeasors under Article 1172 of the Civil Code, delineates the scope of liability by considering causal contribution and the degree of fault, thereby achieving substantive justice where liability corresponds to the degree of wrongdoing. This paper proposes using the theory of semi-superimposed multiple tortfeasors as the legal basis. When the issuer’s misrepresentation has a 100% causal contribution and the securities service institution only bears a partial causal contribution, the latter should assume proportional liability within the overlapping scope. The application pathway for liability should distinguish the functions of securities service institutions, define causal contribution based on the scope of professional matters, classify the level and extent of subjective fault, and accordingly determine the scope of proportional joint and several liability. Furthermore, securities service institutions should be allowed to seek recourse in cases where causal contributions overlap.