Shenzhen investor loses 3.7 million in trust default — how to recover securities disputes and finance lease arrears? A financial rights protection lawyer explains it all in one go.

Last month, a boss who runs an electronic components business in Futian, Shenzhen, came to us with a face full of worry. Last year, he used the company's idle funds to buy a trust product with a promised annualized return of 7.5%, but when it matured, he only got back 10% of his principal, and the remaining 3.7 million yuan vanished into thin air. He asked: "The contract clearly states in black and white that the principal is guaranteed, so how can they flip the script when it comes time to pay out?" And that wasn't even the worst of it—on another equipment financing lease deal, the lessee had also defaulted on three rental payments, totaling over 800,000 yuan. With both problems hitting at once, he was so anxious he couldn't sleep for days.

Cases of financial "landmines" like this are not uncommon in Shenzhen. According to data released by Shenzhen courts, the annual number of first-instance financial cases in Shenzhen has exceeded 30,000 for three consecutive years, with the amounts in dispute frequently reaching into the tens of millions. Many parties assume that having a contract and transfer records in hand guarantees a win, but when they actually reach the courtroom, they discover countless pitfalls hidden in the burden of proof, the proper defendant, and even the selection of the cause of action.

Question: If I suffered losses due to securities misrepresentation, what mandatory conditions must be met before filing a lawsuit?

Many people think that as long as a stock drops, they can sue the listed company, but in reality, it is far simpler than that. Under Article 85 of the Securities Law, only when an information disclosure obligor engages in false records, misleading statements, or material omissions, causing losses to investors in securities trading, shall it bear compensation liability. There are two prerequisites here: first, you must be able to prove that the time of purchasing the stock occurred after the implementation date of the misrepresentation and before the disclosure date; second, there must be a causal relationship between your losses and the misrepresentation. The Shenzhen Intermediate People's Court handled a typical case in which an investor bought shares two weeks before a technology company in Nanshan collapsed. The court ultimately found a direct link between the investor's trading losses and the company's concealment of material litigation and ordered the company to compensate at a ratio of 70%. The Several Provisions of the Supreme People's Court on the Trial of Civil Compensation Cases for Misrepresentation in the Securities Market, revised in 2022, significantly lowered the threshold for filing a case, no longer requiring an administrative penalty as a prerequisite procedure, which in effect opened the door for investors to sue directly.

Question: What is the difference between financial lease contract disputes and ordinary lending? How should I assert my rights?

This is what a Longhua client said last week. He was doing finance lease for printing equipment, and the lessee failed to pay rent for five consecutive months and secretly mortgaged the equipment to a third party. The core of the legal relationship in finance leasing lies in the dual attributes of "financing" and "leasing of the asset." Under Article 735 of the Civil Code, the lessor holds ownership of the equipment, which provides an additional layer of property rights protection compared to ordinary lending. When the lessee defaults, you have two options: first, demand payment of all outstanding rent (including accelerated maturity clauses), or second, terminate the contract and recover the leased asset. However, note that the rent calculation cannot simply be based on an annualized rate of 24%. The total rent in a finance lease includes the equipment acquisition cost, interest, and reasonable profit. When adjusting, the court will apply the liquidation rules under Article 745 of the Civil Code. We handled a case with a subject amount of 12 million yuan, and by simultaneously claiming the rent debt and recovering ownership of the equipment, we helped the client recover 85% of the amount within six months.

Q: If a trust plan matures and cannot be redeemed, what else can be done besides waiting for updates?

First, look at what the contract stipulates. The vast majority of trust contracts contain a "trustee's management duties" clause. If the trustee has failed to exercise prudent diligence, made unauthorized investments, misappropriated funds, or engaged in other such conduct, you may, pursuant to Article 22 of the Trust Law, require it to restore the original state of affairs or compensate for losses. A client in Shenzhen purchased a collective fund plan from a trust company, and later discovered that the funds had been directed into affiliated real estate projects. When we obtained the trust fund transaction records and due diligence reports, we found that the project party was already in severe debt crisis at the time, yet the trust company still disbursed the funds as the active manager. Seizing on this point of fault, we prompted the trust company to reach a settlement agreement on the 43rd day after the case was filed, with 62% of the principal refunded. In trust disputes, the key evidence fixation steps must be completed within 15 days. In particular, you should preserve the ticking/selection records on the subscription risk declaration form—if the seller manipulated the ticking step, this can often serve as the breakthrough point for overturning the case.

In Chinese judicial practice, the upper limit for interest protected by courts in lending disputes is four times the one-year Loan Prime Rate (LPR) at the time the loan contract is established. This standard applies to private lending cases under the judicial interpretation of the Supreme People's Court. For bank loan disputes, banks typically charge interest within regulatory limits set by the People's Bank of China, and courts generally uphold contractually agreed rates as long as they comply with relevant regulations and do not exceed the four-times LPR ceiling. As of recent LPR rates (e.g., 3.45% for one-year LPR), four times this amount equals approximately 13.8% per annum. Interest exceeding this ceiling is not supported by courts.

Many people misunderstand the interest rate red line, thinking that anything exceeding four times the LPR is invalid. This standard applies to private lending, but for loan contracts with banks and financial institutions, courts generally respect the contractual terms, provided that the comprehensive cost of funds does not exceed the annualized 24% judicial protection zone. Last year, the Bao'an District Court in Shenzhen issued a ruling in a case where a joint-stock bank charged micro-enterprise owners an annualized rate of 26% (including service fees). The court determined that the excess portion was invalid, and the interest forcibly deducted was offset against the principal. Additionally, when asserting your rights, remember to sue the guarantor at the same time so that the guarantor does not easily escape liability. The guarantee period is typically six months from the date the principal debt's performance period expires. If you miss this deadline, under Article 693 of the Civil Code, the guarantor may be exempted from guarantee liability, and that would be a significant loss.

Financial disputes are never something that can be resolved by simply filing a lawsuit; the key is to thoroughly work out the cause of action, the basis for claims, and the jurisdictional court before filing. Guangdong Zhiming Law Firm has been rooted in Shenzhen for 26 years. The team led by Chief Attorney Shen Jinlong has handled over 10,000 cases of various types and has extensive practical experience in the financial divisions of the High-tech Zone Court and the Futian Court. If you are troubled by securities losses, trust defaults, or outstanding debts from financial leasing, you are welcome to visit us at Room 1802, Tower A, Xintian Century Business Center, Shixia North Second Street, Futian District, Shenzhen, or call 0755-25986969. Let's first clarify the evidence before deciding the next steps.