Quick Take: Arbitration Gains Popularity in Settling Securities Disputes

Disgruntled investors in China have increasingly sought redress through arbitration outside the country’s courts since the introduction of a free service backed by the securities watchdog.

Shenzhen Securities and Futures Dispute Resolution Center said it has heard over 2,300 cases since its inception in September 2013. The center has successfully settled 477 disputes, awarding a total of 568 million yuan ($85.4 million), it said.

Arbitration over securities disputes has gained popularity in China partly because investors are now more aware of their rights, and also because the country’s courts lack the manpower to handle the surging caseload.

Courts in Shenzhen, which is home to one of China’s two largest stock exchanges, handled over 340,000 cases — not only securities — last year, up 20% from 2015, according to data from the judiciary. Each judge on average issued 283 verdicts in 2016, up 30% from a year ago.

As awareness of investor rights has grown, the China Securities Regulatory Commission (CSRC) has put more effort into policing and cleaning up unlawful practices at listed companies. For instance, Shanghai has launched a pilot program to aggregate disgruntled investors and help them litigate. The CSRC-backed China Securities Investor Services Center in Shanghai has completed two cases since its inception in 2014. This free service rose to fame among investors after it awarded 2.33 million yuan in compensation to 14 investors.

Contact reporter Aries Poon (ariespoon@caixin.com)