CSRC: Explicitly supports and encourages the implementation of advance compensation

On October 19, the China Securities Regulatory Commission (CSRC) publicly solicited opinions on the "Guiding Opinions on Advance Compensation in the Securities Market," with the deadline for feedback set at November 18, 2026. The Guiding Opinions consist of 21 articles, mainly covering five aspects. Among them, it explicitly supports and encourages the implementation of advance compensation. First, on the basis that the Securities Law provides that the advance compensation entity has the right of recourse, it further clarifies that the advance compensation entity, for the purpose of recourse, may obtain materials on the advance compensation situation from the Investor Protection Fund Corporation after advance compensation (Article 15). Second, it clarifies that the CSRC may, in accordance with laws and regulations, take the relevant circumstances of advance compensation as a consideration factor in administrative licensing review, administrative penalty discretion, credit supervision and management of the securities and futures market, and other matters (Article 18). The Guiding Opinions also propose that the Investor Protection Fund Corporation accept entrustment in accordance with the law, sign entrustment agreements with advance compensation entities, and provide professional support services for the implementation of advance compensation. It does not replace the relevant responsible entities in bearing civil compensation liability, nor does it replace the advance compensation entity in exercising the right of recourse. The Investor Protection Fund Corporation shall follow the principles of neutrality, public welfare, professionalism, efficiency, and transparency, perform its duties diligently, safeguard the lawful rights and interests of all participating entities, promote the conclusion of advance compensation, and shall not charge fees to advance compensation entities or investors for providing professional services. The original text is as follows: Guiding Opinions on Advance Compensation in the Securities Market (Draft for Comment) In order to better follow the principles of openness, fairness, and justice, ensure the standardized implementation of advance compensation as provided in Article 93 of the Securities Law of the People's Republic of China, support advance compensation entities in entrusting investor protection institutions to carry out advance compensation in accordance with the law in a convenient and efficient manner, and effectively protect the lawful rights and interests of investors, these Guiding Opinions are formulated in accordance with the Securities Law of the People's Republic of China and other laws and regulations. Article 1 Where an issuer causes losses to investors due to fraudulent issuance, false statements, or other major illegal acts, and the issuer's controlling shareholder, actual controller, or relevant securities company (hereinafter collectively referred to as the advance compensation entity) voluntarily advances compensation for the losses of all investors in the case, these Guiding Opinions shall apply. Article 2 Advance compensation shall follow the principles of legality and compliance, voluntariness and good faith, and openness and transparency, and shall fully safeguard investors' rights to know, to choose, and to claim compensation. Article 3 The advance compensation entity may entrust China Securities Investor Protection Fund Corporation Limited (hereinafter referred to as the Investor Protection Fund Corporation) to reach an agreement with injured investors on compensation matters and make advance compensation. Article 4 The Investor Protection Fund Corporation accepts entrustment in accordance with the law, signs an entrustment agreement with the advance compensation entity, and provides professional support services for the implementation of advance compensation. It does not replace the relevant responsible entities in bearing civil compensation liability, nor does it replace the advance compensation entity in exercising the right of recourse. Article 5 When the Investor Protection Fund Corporation accepts entrustment from an advance compensation entity, it shall evaluate the following matters: (1) The advance compensation entity has the corresponding compensation capacity; (2) The main facts of the case are clear; (3) The elements for calculating investor losses are clear; (4) The entrustment authorization of the advance compensation entity is sufficient and effective; (5) There are no other circumstances that may affect the advance compensation. During the evaluation process, the Investor Protection Fund Corporation may seek expert opinions through appropriate means. If the Investor Protection Fund Corporation considers upon evaluation that the circumstances do not conform to the provisions of the preceding paragraph, it may not accept the entrustment of the advance compensation entity. Article 6 The Investor Protection Fund Corporation shall follow the principles of neutrality, public welfare, professionalism, efficiency, and transparency, perform its duties diligently, safeguard the lawful rights and interests of all participating entities, promote the conclusion of advance compensation, and shall not charge fees to advance compensation entities or investors for providing professional services. Article 7 The Investor Protection Fund Corporation may accept entrustment to provide the following services: (1) Guiding the implementation of advance compensation. Providing professional consultation, opinions, and suggestions for the advance compensation entity in formulating advance compensation plans, information release, investor communication, and other matters. (2) Providing loss calculation support services. Obtaining transaction and settlement data from China Securities Depository and Clearing Corporation Limited (hereinafter referred to as ChinaClear) upon entrustment, and providing loss calculation services in accordance with the loss calculation elements and methods determined by the advance compensation entity. (3) Establishing an advance compensation column. Establishing an advance compensation column on the official website of the Investor Protection Fund Corporation, and providing services such as centralized information release and eligible investor information inquiry upon entrustment. (4) Serving as manager of a special fund. Serving as manager of the advance compensation special fund upon entrustment, performing duties such as fund supervision, compensation accounting, fund transfer, and special fund liquidation, and promptly disclosing implementation progress. Article 8 The advance compensation entity shall, at important milestones such as the determination of the compensation plan, the establishment of the special fund, the start and end of the investor declaration period, and the arrival of compensation funds, promptly release announcements through multiple channels, carry out plan publicity and guidance and investor responses through online platforms, consultation hotlines, and other means, provide convenience for investors to promptly learn about and participate in advance compensation, and fully safeguard investors' rights to know and to choose. Article 9 The advance compensation entity shall, with reference to the relevant judicial interpretations of the Supreme People's Court on the trial of civil compensation cases for false statements in the securities market and other provisions, follow the principles of intensively resolving conflicts, treating investors fairly, facilitating investor participation, and effectively protecting the lawful rights and interests of investors, and formulate an advance compensation plan. The advance compensation plan shall be concise and clear, easy to understand, and state necessary contents such as the scope of eligible investors and the method for determining eligibility, the elements and methods for calculating compensation amounts, investor declaration channels, and the declaration period. Article 10 The advance compensation entity shall, in the announced advance compensation plan, fully prompt investors in a conspicuous manner of the legal consequences of accepting advance compensation, including: declaration of consent to accept advance compensation shall be deemed as recognition of the settlement agreement stated in the advance compensation plan; after obtaining the advance compensation payment, the right to claim compensation against the issuer in this case and all other jointly and severally liable persons shall be fully transferred to the advance compensation entity, and the advance compensation entity shall exercise the right of recourse in accordance with the law. Article 11 Before the advance compensation plan is officially released, the advance compensation entity shall promptly and fully transfer the proposed compensation funds into the advance compensation special fund account. The Investor Protection Fund Corporation shall implement special account management and earmark funds for designated purposes for the advance compensation special fund. Article 12 After the advance compensation plan is officially released, the advance compensation entity may entrust the Investor Protection Fund Corporation to upload the compensation information of eligible investors to the advance compensation column on the official website of the Investor Protection Fund Corporation for investor inquiry. The Investor Protection Fund Corporation may request the Securities Association of China to coordinate and organize the securities companies with which investors have opened accounts and their business outlets to cooperate in information transmission, notification and reminders, assistance services, and other support work. Securities trading venues and ChinaClear shall provide necessary technical support for advance compensation. Article 13 Eligible investors may, within the declaration period stated in the announcement, declare through the online or offline channels designated in the advance compensation plan, and independently choose whether to accept advance compensation. Article 14 After the investor declaration period expires, the Investor Protection Fund Corporation shall, in accordance with the entrustment agreement and the advance compensation plan, handle the transfer of compensation funds based on the verified and confirmed declaration results. The Investor Protection Fund Corporation may entrust ChinaClear to transfer compensation funds to settlement participants, and the settlement participants shall then transfer the compensation funds to the relevant investors. Article 15 After advance compensation, the advance compensation entity may seek recourse against the issuer and other jointly and severally liable persons in accordance with the law. For the purpose of recourse, the advance compensation entity may, after advance compensation, apply to the Investor Protection Fund Corporation for access to materials on the advance compensation situation. Article 16 The Investor Protection Fund Corporation shall, in accordance with these Guiding Opinions, formulate relevant business rules for advance compensation and provide necessary guarantees for carrying out advance compensation services. Article 17 The Investor Protection Fund Corporation shall establish and improve working mechanisms with ChinaClear, securities trading venues, the Securities Association of China, and other entities, and strengthen collaboration. Article 18 The CSRC may, in accordance with laws and regulations, take the relevant circumstances of advance compensation as a consideration factor in administrative licensing review, administrative penalty discretion, credit supervision and management of the securities and futures market, and other matters. Article 19 The CSRC shall supervise the Investor Protection Fund Corporation's entrusted work in carrying out advance compensation, and the relevant dispatched offices shall cooperate in publicity and guidance and other related work concerning the advance compensation system. Article 20 Where entities other than the advance compensation entities specified in Article 1 of these Guiding Opinions, such as accounting firms and law firms, voluntarily advance compensation for investor losses, these Guiding Opinions may be applied by reference. Article 21 These Guiding Opinions shall come into effect on the date of promulgation. Drafting Explanation of the "Guiding Opinions on Advance Compensation in the Securities Market (Draft for Comment)" In order to promote and ensure that advance compensation activities provided in Article 93 of the Securities Law are implemented in a more standardized, transparent, and predictable manner, and to better leverage the function of the advance compensation system in quickly resolving securities mass disputes, the CSRC has drafted the "Guiding Opinions on Advance Compensation in the Securities Market (Draft for Comment)" (hereinafter referred to as the Guiding Opinions). The drafting situation is explained as follows: I. Drafting Background Advance compensation is one of the diversified resolution mechanisms for securities disputes provided in the Securities Law. It is an advocacy provision in the field of securities civil torts, aimed at encouraging market entities to resolve mass disputes through voluntary compensation and independent settlement. As individual cases have continued to enrich practice, the problems of this system being highly principled and lacking operational guidance have gradually emerged, affecting to some extent the uniformity of the system's application and the quality and efficiency of dispute resolution. In order to promote the transparency and standardization of this system and cultivate a healthy market dispute resolution ecosystem, the CSRC has adhered to the working approach of guidance and regulation. On the one hand, the "Provisions on the Regulatory Duties of Dispatched Offices of the CSRC" (CSRC Order No. 229) clarifies that dispatched offices may, in accordance with the law, promote relevant entities to apply the advance compensation system. On the other hand, strictly based on the advocacy positioning of Article 93 of the Securities Law, systematically summarizing past cases, and within the existing legal framework, the Guiding Opinions have been drafted to further standardize the specific implementation methods of advance compensation activities, clarify the scope of entrusted services of investor protection institutions in the advance compensation process, and provide public guidance for market entities to proactively implement advance compensation. II. Main Content The Guiding Opinions consist of 21 articles, mainly covering five aspects: (I) Clarifying the applicable entities and basic positioning of advance compensation. First, on the basis that Article 93 of the Securities Law provides that the issuer's controlling shareholder, actual controller, and relevant securities companies may entrust investor protection institutions to carry out advance compensation, and in light of practical needs, it further clarifies that where entities other than those provided in the Securities Law, such as accounting firms and law firms, voluntarily advance compensation, these Guiding Opinions may be applied by reference (Articles 1 and 20). Second, it emphasizes that advance compensation is a voluntary civil settlement between the aforementioned entities and injured investors. After the advance compensation entity proactively implements advance compensation, it shall acquire by law the investors' right to claim compensation against the issuer and other jointly and severally liable persons, and exercise the right of recourse (Articles 2 and 10). (II) Clarifying the methods and scope of entrusted services of the Investor Protection Fund Corporation. First, in order to promote the convenient and efficient implementation of advance compensation activities, it clarifies that China Securities Investor Protection Fund Corporation Limited (hereinafter referred to as the Investor Protection Fund Corporation) shall provide advance compensation entities with a package of full-process services including guidance on the formulation and implementation of advance compensation plans, calculation of investor losses, establishment of an advance compensation column on its official website, and special fund management (Articles 3 and 7). Second, it clarifies that the Investor Protection Fund Corporation provides professional support services based on the voluntary entrustment of the advance compensation entity, does not charge fees, does not replace the relevant responsible entities in bearing civil liability, and does not replace the advance compensation entity in exercising the right of recourse (Articles 4 and 6). Third, it clarifies the entrusted evaluation mechanism of the Investor Protection Fund Corporation. Cases entrusted to the Investor Protection Fund Corporation for implementation of advance compensation shall have clear facts, clear elements for calculating investor losses, and the advance compensation entity shall have corresponding compensation capacity and have made sufficient and effective authorization. The Investor Protection Fund Corporation may seek expert opinions during the evaluation process. For cases with complex circumstances, difficult-to-determine loss calculation elements, and significant disagreements among parties, it may not accept the entrustment and guide market entities to resolve disputes through judicial and other channels (Article 5). (III) Standardizing the main implementation procedures of advance compensation. In order to facilitate relevant entities in proactively implementing advance compensation, strengthen the protection of investor rights during implementation, better clarify the path, and stabilize expectations, the Guiding Opinions systematically sort out the main implementation procedures of advance compensation and put forward basic requirements for relevant key stages. First, the advance compensation entity shall promptly release announcements at important milestones, conduct investor communication well, provide convenience for investors to participate in advance compensation, and fully safeguard investor rights (Article 8). Second, the advance compensation entity shall, with reference to relevant judicial interpretation provisions, properly formulate an advance compensation plan, state necessary contents, conspicuously prompt the legal consequences of accepting advance compensation, and fully transfer compensation funds into the special fund account before the advance compensation plan is released (Articles 9, 10, and 11). Third, investors may inquire on the advance compensation column on the official website of the Investor Protection Fund Corporation and independently choose whether to accept advance compensation within the declaration period stated in the announcement (Articles 12 and 13). After the declaration period expires, compensation funds shall be transferred to investors who accept advance compensation in accordance with the advance compensation plan (Article 14). (IV) Clarifying the coordination mechanism of relevant entities in the advance compensation process. The convenient and efficient implementation of the advance compensation system cannot be separated from the necessary supporting support of relevant entities, securities companies, and others. The Guiding Opinions sort out the relevant stages, request relevant entities, securities companies, and their business outlets to provide coordinated support, and after the Investor Protection Fund Corporation accepts the package entrustment, it then entrusts relevant data support, technical support, investor services, fund transfer, and other matters, thereby improving the overall efficiency of advance compensation (Articles 7, 12, 14, and 17). (V) Explicitly supporting and encouraging the implementation of advance compensation. First, on the basis that the Securities Law provides that the advance compensation entity has the right of recourse, it further clarifies that the advance compensation entity, for the purpose of recourse, may obtain materials on the advance compensation situation from the Investor Protection Fund Corporation after advance compensation (Article 15). Second, it clarifies that the CSRC may, in accordance with laws and regulations, take the relevant circumstances of advance compensation as a consideration factor in administrative licensing review, administrative penalty discretion, credit supervision and management of the securities and futures market, and other matters (Article 18). This article is excerpted from the official website of the CSRC, edited by GMTEight: Feng Qiuyi.