Revelation of Bond Dispute (II) - The change of tort compensation liability of accounting firm as the gatekeeper of securities market

The China Securities Regulatory Commission (CSRC) has imposed an administrative penalty on an accounting firm for failing to perform its audit work diligently, confiscating all business income during the period involved in the case and imposing a maximum fine. After investigation, it was found that the accounting firm violated a number of audit standards, violated a number of audit requirements, a number of audit procedures failed to maintain due professional suspicion, did not make correct professional judgment, and did not find large amounts and a high proportion of financial fraud during the audit process.

To this end, the Dehehaantong financial dispute dispute resolution team will combine practical experience to launch a series of articles “Bond Dispute Revelation”, focusing on the core issues in the field of current bond disputes from the aspects of bond governance, bond default disposal, securities/bond misrepresentation, tort compensation liability of intermediaries, whether the misrepresentation is significant, and the calculation model of bond misrepresentation losses. And put forward practical suggestions.

This is the second article in the “Bond Dispute Revelation” series, and we will discuss the accounting firm as one of the gatekeepers of the securities market audit tort compensation liability, in the past judgment cases on the liability identification standards and standards are not uniform. However, with the release of the latest judicial interpretation, understanding and application of securities misrepresentation, and the reply of securities regulatory authorities, the accounting firm has not only given a clearer defense space, so that it is free from litigation, but also given the market confidence in the sustainable development of the goal of “matching responsibility with infringement”.

01, the “long tooth belt” of securities supervision does not affect the “responsibility and tort matching” of securities gatekeepers

In recent years, the securities regulatory authorities have stressed the resolute implementation of the “long teeth and thorns” and angular requirements of supervision, highlighted strict supervision and strict management, continued to increase the investigation and punishment of financial fraud in the capital market and audit institutions that are not diligent and responsible, and made every effort to maintain the smooth operation of the capital market, protect the legitimate rights and interests of investors, and provide a strong guarantee for the high-quality development of the capital market. At the same time, the people's Court, experts, scholars and regulatory authorities have been discussing the “Several Provisions of the Supreme People's Court on Hearing Civil Compensation Cases for False Statements in the Securities Market” (hereinafter referred to as the “Certain Provisions”), and all parties have analyzed the changes revealed in the “Certain Provisions” from different angles and the judgment scale that may still be retained.

In the first administrative punishment, the CSRC emphasized the following five points: First, the audit working paper is distorted, about 88% of the records in the observation of real estate projects are inconsistent with the actual implementation, and the content of the draft records is seriously unreliable. The second is the failure of the on-site visit procedure. Most of the real estate that meets the conditions for delivery during the on-site visit have not actually been completed and delivered, and some of them are still not completed and delivered when I investigate on the spot, or even “an empty lot”. Third, the sample selection scope is out of control, allowing the company to replace the samples, and excluding the real estate projects marked “do not let go” by the company from the sample visit. The fourth is the failure of the document inspection procedure, the verification of no abnormal delivery list, in fact, a large number of owners signed the confirmation date later than the balance sheet date. Fifth, the review procedure is lost, the on-site visit procedure review work is mere formality, and the review personnel issue the review conclusion based on the “trust” of the visiting personnel. It can be predicted that the above non-diligent behavior will be highly likely to be reflected in the future tort liability civil compensation, and the court will focus on the “liability and tort matching” pointed to by such behavior.

In this regard, the author hopes to discuss the liability change of the security market gatekeeper [1] in the liability dispute of securities misrepresentation, especially the accounting firm that is one of the security market gatekeeper and conducts audit according to law. Generally speaking, under the premise that the issuer or listed company has misrepresentation, accounting firms will inevitably bear more or less joint and several liability for the professional services provided in the process of securities service. However, the author found that with the increasing specialization of financial trials, under the background of the unified judicial judgment in the Minutes of the National Court Civil and Commercial Trial Work Conference, the market has increasingly called for the equalization of punishment for securities service institutions, especially accounting firms, which also gives accounting firms a greater degree of defense space on joint and several liability. This paper will further analyze the liability logic of accounting firms' liability in securities misrepresentation cases by combining the existing precedents and laws and regulations such as Article 17 and Article 18 of Several Provisions, so as to promote the normative development of the industry.

02. Shanghai High Court Reference Case No. 119: Judicial practice in determining the liability of accounting firms

In the civil judgment of the second instance of the liability dispute between China Merchants Securities Co., Ltd. and Li Muchuan and Zhou Mudong Securities for false statements issued by the Shanghai Higher People's Court (hereinafter referred to as the Shanghai High Court) [the first case number is (2019) Hu 74 Minchu 049, the second case number is (2020) Hu Min End 666, Reference Case No. 119], The Court of second instance held that as to whether Ruihua Firm was diligent and responsible. In the case of the “Smart stone Crutche” project, Ruihua Firm sent the “Enterprise Confirmation Letter” dated January 24, 2014 to the Shiguai District government of Baotou City, but the letter did not show any reply or confirmation from the other party. The Detailed Statement of the Results of the Receivables Letter Return dated January 24, 2014, produced by Ruihua Firm, also records that the project has received the letter of confirmation and confirmed the sales amount of 50 million yuan. Ruihua Firm did not give a reasonable explanation for how the “return letter to confirm the sales amount” was listed in the audit working paper.

The author believes that, on the one hand, in the case that Ruihua Firm cannot make a reasonable explanation for the issuance and withdrawal of the “Corporate confirmation Letter”, it is found that Ruihua firm is not diligent and responsible, which is in line with the market's expectations for the gatekeeper of the securities market, and also in line with the liability logic in the field of civil evidence. On the other hand, the independent audit of the accounting firm has a natural defect, and it only bears reasonable guarantee responsibility for the audit report issued by the accounting firm, but not absolute guarantee responsibility. The audit of the accounting firm does not endorse all the details. Therefore, as long as the accounting firm has implemented proper auditing procedures, there is no need to doubt the authenticity of the obtained documents and financial information [2]. This is also clear in the provisions of article 19 [3], paragraph 2, of the Provisions. From the perspective of the field of audit practice, the determination of this rule is conducive to ensuring the reliability and dependability of the final audit report to a certain extent, while ensuring the reasonable expenditure of accounting firms. At the same time, it avoids excessive verification expenditure leading to exceeding revenue and affecting the balance of payments of accounting firms and even the industry.

In addition, in reference Case No. 119 of the Shanghai Higher People's Court, the Court of Second Instance held that “Ruihua failed to provide evidence that it had implemented the necessary audit procedures, and lacked due attention to the actual commencement, construction progress, completion progress, and necessary data review of the 'Smart Stone turn' project.” Accordingly, Ruihua Firm in the process of issuing the audit report involved in the case, there is a lack of diligence.

In the author's opinion, it is debatable whether the responsibility boundary of audit institutions includes project implementation details such as “commencement, construction progress, completion progress”. Generally speaking, such details are not the core content of the audit field of course, and there is no significant necessity to require data review. Audit is not an actuarial science, and the inherent risk of financial data and the sampling audit method make the authenticity of audit reports only relative [4]. In areas that do not necessarily need attention, accounting firms are required to be diligent and responsible, which is suspected of backtracking from results. From the root point of view, the accounting firm is the public information inspection institution, rather than the information disclosure obligation under the “Certain Provisions”, the accounting firm is only the issuer disclosure of financial information verification institution, in the case of tracing the source data there are artificial defects, requiring the accounting firm to find false statements, beyond the industry practice standards of accounting firms.

Article 18 [5] of the Provisions also clearly stipulates that the liability of an accounting firm is limited to its work scope and professional field. The criteria for judging whether an accounting firm is at fault are refined as follows: refer to the work scope and procedural requirements stipulated in the practice norms of the industry, and determine whether it is at fault based on relevant evidence such as verification and verification of working papers; If it can prove that the basic work or professional advice it relies on has been prudently verified and necessary investigation and review, and professional doubts have been eliminated and reasonable trust has been formed, it shall be determined that there is no fault. Compared with the Provisions of the Supreme People's Court on the Trial of Civil Compensation Cases Caused by False Statements in the Securities Market in 2003, the Provisions are undoubtedly more able to fairly and justly protect the legitimate rights and interests of investors from being infringed. In the case that accounting firms cannot prove that they are not at fault, laws and regulations are still inclined to the rights and interests of investors. This is also in line with the latest value orientation that investors and accounting firms bear different burden of proof. At the same time, the provisions put forward higher requirements for the practice of the gatekeeper of the securities market. On the premise that it can indeed provide evidence to prove that professional doubts can be eliminated and reasonable trust can be formed, the Provisions give accounting firms considerable space for defense, which helps to improve the overall practice level of the industry.

Proceeding from article 18 of the Provisions, the author believes that the matters considered by the court to lack due attention in the above cases may no longer be considered as the scope of work and areas of expertise of the audit institution. However, whether professional doubts can be completely eliminated and reasonable trust can be formed is worthy of further discussion in combination with evidence materials. Whether written letters can be used to verify that “as long as the accounting firm has implemented proper audit procedures, there is no need to doubt the authenticity of the obtained letters and financial information”, according to the existing effective judgment, the answer is in the negative. The written evidence of the existing case level is not enough to enable the court to eliminate professional doubts and form reasonable trust from the perspective of accounting firms. Therefore, there is still a lot of basic preparation work for accounting firms to prove their diligence and responsibility in the future, and the daily compliance operation of accounting firms needs to be improved.

There are also views that the above cases are precisely in line with the provisions of the “Certain Provisions”, in line with the provisions of article 6 [6] of the provisions of the “predictive information safe harbor principle” exception. In reference Case No. 119 of Shanghai Higher People's Court, the information disclosure documents involved in the case include the Profit Forecast Audit Report, which is predictive information on profit forecast, development planning, etc. In combination with Certain Provisions, even if there is a major difference with the actual business situation, it cannot certainly be determined that the firm has carried out false statements. This is consistent with the fundamental attribute of the forecast information, no one can predict the future events, which is also to give special care to listed companies when disclosing to the outside world, to avoid overly strict information disclosure rules resulting in listed companies completely unable to disclose potential good news, and correctly guide investors' trading decisions. In this regard, when the court determined the responsibility of Ruihua Firm, it also fully considered the characteristics of the profit forecast itself, and the court focused on whether the key projects affecting the profit forecast had been formally audited in terms of actual performance. This is consistent with the exception to some extent, whether the works are actually performed and whether there are significant changes, in the view of the court, is the basis of the forecast information. If the accounting firm can discover the construction details, it may avoid the occurrence of such information disclosure violations and misrepresentations. However, given that Certain Provisions were issued later than the above cases, the disclosure of predictive information has not been fully discussed in accordance with Certain Provisions.

03. People's courts and regulatory departments have increasingly strengthened the protection of securities service institutions

The Supreme People's Court (hereinafter referred to as the Supreme People's Court) and the China Securities Regulatory Commission (hereinafter referred to as the CSRC) have issued relevant documents to clarify the liability determination of securities service institutions such as accounting firms mentioned in the above cases. In the case that the market generally does not expect accounting firms and other securities market gatekeepers to bear excessive compensation liability due to false statements, the documents of the Supreme Court and the CSRC undoubtedly have a positive impact on the market, and also inject a strong injection into the integrity and compliance operation of accounting firms. I believe that the judgment of the inherent connection between negligence and punishment will be changed. In the case of Zhou v. Chengdu Huazei Cobalt-Nickel Materials Co., LTD., Guoxin Securities Co., LTD., and other disputes over the liability of securities false statements [the first case number is (2019) Chuan 01 Minchu 1626, the second case number is (2020) Chuanmin End 293], the Chengdu Intermediate People's Court held that “The legislative purpose of the securities law is to effectively safeguard the legitimate rights and interests of investors, and realize the function of deterring violations through civil liability investigation, and maintain the open, fair and just market order of the capital market. It is necessary to evaluate the consequences caused by the infringing acts of different subjects, so as to distinguish their respective share of liability, and realize the liability match with the degree of infringement acts and subjective faults.” The author believes that the compensation liability of accounting firm in the dispute of liability for misrepresentation of securities should match its fault degree.

In 2022, the Understanding and Application of Several Provisions on Hearing Cases of Tort Compensation for False Statements in the Securities Market (hereinafter referred to as “Understanding and Application”) [7] emphasized that “the actual situation in the trial of liability cases of accounting firms in recent years, On the basis of the provisions of Article 7 of the Provisions on Hearing Civil Tort Compensation Cases Involving Accounting Firms in Audit Business Activities (hereinafter referred to as the “Audit Provisions”) and taking into account the opinions of the Ministry of Finance, CSRC and other regulatory departments, Article 19 of the Provisions stipulates the reasons for exemption of accounting firms. To protect accounting firms practising in accordance with the law from litigation”.

In the “Understanding and Application”, the Supreme Law clearly stipulates that “Article 163 [8] of the Securities Law of the People's Republic of China (hereinafter referred to as the “Securities Law”) provides for the civil liability of false statements, and its legal source should be traced to Article 1165 of the Civil Code of the People's Republic of China on “where the perpetrator infringes on the civil rights and interests of others by mistake and causes damage,” Shall bear tort liability. If the actor is presumed to be at fault according to the provisions of the law, and he cannot prove that he is not at fault, he shall bear tort liability '.”

Understanding and Application further emphasizes that there are two viewpoints in domestic academic circles regarding the presumed fault liability of securities service institutions stipulated in Article 163 of the Securities Law of the People's Republic of China: one is that the fault in the securities law has the same meaning as the fault in the civil law, including intent, gross negligence and minor negligence; Another view is that the fault in the securities law is different from the fault in the sense of civil law. In the false statement of securities in the secondary market, there is no contractual relationship between the intermediary and the investor, and the liability cannot be determined solely by contractual obligations. In particular, it is necessary to distinguish whether there is intentional or gross negligence, and if the fault is only minor, it should not be held liable. Article 13 [9] stipulates that the fault is clearly limited to intentional and gross negligence. The reason is that: From the perspective of system interpretation, according to the interpretation method of heavy lifting, the responsibility of accounting firms as external supervisors cannot be heavier than that of internal personnel such as issuers; According to the US securities law, “only intentional fraud, knowingly allowing false statements to mislead investors, and gross negligence in disregard of facts” constitute a fault in the securities law, while minor negligence cannot generate huge civil liability to avoid the chilling effect that information disclosure may cause. And to avoid accounting firms and other intermediary agencies to attract talent and enterprise management have adverse effects. To this end, the Provisions specify, on the basis of article 13, the circumstances that constitute an exoneration, and article 19 can also be understood to be less severe than minor negligence.

Similarly, in the “Reply to the Fourth Session of the 13th National People's Congress Recommendation No. 3755” (hereinafter referred to as the “NPC Recommendation Reply”), the CSRC clearly stated that “I will strictly distinguish between accounting responsibility and audit responsibility in the daily supervision and law enforcement process, and determine accounting responsibility based on whether the accounting Standards for Business Enterprises and other accounting systems are violated.” The judgment of audit responsibility is based on whether it violates the practice standards such as the Professional Standards for Certified Public Accountants of China, and does not directly “reverse” the audit responsibility of the audit institution based on the false accounting responsibility of the listed company and other subjects. We agree with the recommendations made in the proposal, and will continue to strengthen the accounting supervision of the capital market, continue to promote various entities to fulfill their responsibilities, and effectively improve the quality of financial information disclosure in the capital market and the practicing ability of audit institutions.

In the “NPC Proposal Reply”, the CSRC has also made clear that Article 163 of the Securities Law provides that... We believe that this provision should be interpreted based on the provisions and principles of tort law, that is, on the basis of how to distinguish the type of the infringer's fault, determine the tort liability that is appropriate to the degree of fault; At the same time, it is also necessary to consider the balance between legal logic and public policy, that is, under the premise of following the principle of tort law, taking into account the realization of the dual policy objectives of “encouraging securities service institutions to effectively play the role of gatekeeper by means of tort liability” and “avoiding the threat of excessive responsibility to the industry operation of securities service institutions”, and effectively guaranteeing the healthy development of the capital market.

This point is also reflected in trial practice and judicial interpretation. For example, as early as in Article 7 [10] of the Provisions on Auditing, the Supreme People's Court has provided for exemptions similar to those in the Provisions. Article 30 [11] of the Supreme People's Court's Symposium on the Trial of Bond Dispute Cases (hereinafter referred to as “Bond Minutes”) lists the reasons for exemption of underwriting institutions, which are not exactly the same as accounting firms, but also have certain reference significance. Item 3 is similar to “beyond reasonable doubt” in Article 18 of Certain Provisions. Item 4 has not appeared in Certain Provisions or Understanding and Application, but the author believes that “it is difficult to find out even if the relevant procedures are fully performed” stipulated in Item 4 can also be applied to the exemption of accounting firms. In the future, when accounting firms defend liability, At a minimum, these circumstances could be included in the backstop of article 19 of the Certain Provisions, “other circumstances where no fault can be proved”.

In view of the situation stipulated in item 4 of Article 30 of the Bond Summary, the author has encountered in similar cases the misrepresentation of related parties and related relationships that were not disclosed by the accounting firm because the controlling shareholder of the listed company did not voluntarily disclose the equity holding. If the cover clause of Article 19 of Certain Provisions is applied, the accounting firm may argue that the cause of equity holding is “difficult to find even if the relevant procedures are fully performed”, in this case, the accounting firm cannot be severely held responsible for the “non-listed company's direct” indirect information disclosure defects. In the author's opinion, in this type of false statement, the liability of the accounting firm has exceeded the provisions of the industry practice standard, the intermediary agency has no way to know the holding situation of the controlling shareholder, and the behavior of the accounting firm is not even the case of minor negligence, so it does not need to bear the liability of compensation for securities false statement.

04, give the accounting firm the opportunity to prove that it should not bear the responsibility

In summary, the “Several Provisions” have abolished the pre-procedure, and no longer take the administrative punishment decision of the securities regulatory department as the premise of filing a case. On the other hand, law enforcement investigations by regulatory departments should be independent of civil trials by people's courts. Regardless of whether there is a case investigation or administrative punishment in the first place, and regardless of whether the duty of diligence is ascertained in administrative law enforcement, securities service organizations such as accounting firms should be given the opportunity to prove with evidence that they should not bear the liability for false statements. Avoid unjust situations in which the result backfires the cause.

Similarly, in the “NPC Proposal Reply”, the CSRC agreed with the proposal on “... 'Securities service institutions can prove that they are not at fault, do not bear the liability for compensation', and clearly replied that for the liability for investor losses caused by negligence of securities service institutions, ”the Supreme People's Court will speed up the in-depth investigation of this issue and introduce rules to reasonably determine the civil liability of securities service institutions as soon as possible, so as to accurately apply the relevant provisions of the securities Law.“ Balance and protect the interests of relevant subjects, and fairly distribute the tort liability and the loss of commercial activities.” We believe that in the future trial practice will gradually determine the securities market gatekeepers, especially accounting firms bear the specific standards of tort compensation liability.

The series of articles “Revelation of Bond Disputes” will further discuss the change of liability of the gatekeeper of the securities market, especially the accounting firm, and start from the “diligence and due diligence defense” of the service organization in the United States securities law, and extend the possible liability logic of the accounting firm in the future judicial practice.

Notes:

1. The gatekeeper of the securities market usually refers to the “securities service agency”, that is, the law firm, accounting firm, credit rating agency, etc., which prepares and issues legal opinions, audit reports, asset evaluation reports, credit rating reports and other documents for securities business activities such as securities issuance, listing and trading as stipulated in Article 163 of the Securities Law of the People's Republic of China.

2. He Haifeng, Chen Haoxin, Jiang Ruonan, “How can the Economic Police be held Accountable?” -- New “Several Regulations on False Statements” Civil Liability of Times Accounting Firm | Securities Law Review, author unit of Beijing Office of Tiantong Law Firm, published on wechat public account of Tiantong Litigation Circle on February 28, 2022.

(3) Article 19 of the Provisions provides: “If an accounting firm can prove one of the following circumstances, the people's court shall find that it is not at fault:

(1) In accordance with the working procedures and verification means determined by the practice standards and rules and maintaining the necessary professional caution, there is still no error found in the audited accounting data;

(b) the audit business must rely on financial institutions, issuers suppliers, customers and other relevant units to provide false certification documents, accounting firms have maintained the necessary professional caution still not found;

(3) having warned the issuer of signs of fraud and issued a prudential audit opinion in the audit business report;

(4) other circumstances in which no fault can be proved.”

4. See the Second Civil Trial Division of the Supreme People's Court, “The Supreme People's Court's Understanding and Application of Accounting Firms' Liability for Audit Infringement” (“ The Understanding and Application of Audit Infringement ”), People's Court Publishing House, 2007, pp. 266-267.

5. Article 18 of the Provisions provides that: “Where accounting firms, law firms, credit rating agencies, asset assessment agencies, financial advisers and other securities service agencies produce or issue documents with false statements, the people's court shall, in accordance with laws, administrative regulations, rules and regulatory documents formulated by the regulatory department, refer to the scope of work and procedural requirements stipulated in the practice norms of the industry, In combination with relevant evidence such as verification and verification of working papers, determine whether there is fault.

The responsibility of a securities service institution is limited to its work scope and professional field. If a securities service institution relies on the basic work or professional opinions of a sponsor institution or other securities service institution, resulting in the existence of false statements in the professional opinions issued by it, it can prove that the basic work or professional opinions it relies on have been carefully checked and the necessary investigation and review have been carried out. If professional doubt is eliminated and reasonable trust is formed, the people's court shall find that the person is not at fault.”

6. Article 6 of the Provisions stipulates: “Where the plaintiff claims that the issuer makes false statements on the grounds that there are significant differences between the profit forecast, development planning and other predictive information in the information disclosure documents and the actual business situation, the People's court will not support it, except in one of the following circumstances:

(A) the information disclosure documents do not adequately indicate the risk of important factors affecting the realization of the forecast;

(b) the predictive information is based on the basic assumptions, the selection of accounting policies and other compilation basis is obviously unreasonable;

(3) failing to fulfill the obligation of correction in a timely manner when the premise on which the predictive information is based changes significantly.

The “major differences” mentioned in the preceding paragraph may be identified by reference to the relevant regulations of regulatory authorities and securities trading venues.”

7. See Lin Wenxue, Fu Jinlian, Zhou Lunjun, "Understanding and Application of Several Provisions on Hearing Civil Compensation Cases for False Statements in the Securities Market", People's Justice, No. 7, 2022.

8. Article 163 of the Securities Act provides that: “Securities service agencies for securities issuance, listing, trading and other securities business activities, the preparation and issuance of audit reports and other authentication reports, asset evaluation reports, financial consultant reports, credit rating reports or legal opinions and other documents, shall be diligent and responsible, on the basis of the authenticity, accuracy, integrity of the content of the documents and materials to verify and verify.” Where the documents produced or issued by the client contain false records, misleading statements or major omissions, thereby causing losses to others, the client shall bear joint and several liability for compensation, unless it can prove that it is not at fault.

9. Article 13 of the “Certain Provisions” stipulates: “The faults mentioned in Articles 85 and 163 of the Securities Law include the following two circumstances:

(1) The perpetrator intentionally makes and issues information disclosure documents containing false statements, or knows that the information disclosure documents contain false statements and fails to specify and release them;

(2) the perpetrator seriously breaches the duty of care and is negligent in the formation or publication of false statements in information disclosure documents.”

10. Article 7 of the Provisions on Auditing provides that: “An accounting firm shall not be liable for civil compensation if it can prove that one of the following circumstances exists:

(A) has complied with the working procedures determined by the practice standards and rules and maintained the necessary professional caution, but still failed to find the accounting information under audit error;

(2) A financial institution or other entity on which the audit business must rely provides false or inaccurate supporting documents, and the accounting firm fails to detect such false or inaccurate documents despite maintaining the necessary professional caution;

(3) It has warned the audited entity of signs of fraud and indicated them in the audit business report;

(4) the capital verification procedures have been reviewed and issued a report, but the capital verification unit has withdrawn funds after registration;

(5) To issue false reports for the investor who has not contributed capital or has not contributed capital in full at the time of registration, but the investor has made up the capital contribution after registration.”

11. Article 30 of the Bond Notes provides: “The defence of immunity of the bond underwriting institution. If the bond underwriting institution can submit due diligence working papers, due diligence reports and other evidence to prove that the relevant content of the issuer's solvency in the issuer's information disclosure documents meets one of the following circumstances, the people's court shall find that it is not at fault:

(1) In accordance with the requirements of laws, administrative regulations and regulatory documents, practice norms and self-regulatory rules of the bond regulatory authorities, reasonable due diligence has been conducted on the relevant situation of the bond issuance by means of consulting, interviewing, attending meetings, field investigation, confirmation and discussion;

(2) For the important content in the information disclosure document that is not supported by the professional advice of the bond service agency, after due diligence and independent judgment, there is reasonable reason to believe that the content of the information disclosure is consistent with the real situation;

(3) For the important content of professional opinions issued by relevant bond service institutions in information disclosure documents, on the basis of careful verification and necessary investigation and review, the original reasonable doubt is eliminated;

(4) Although the due diligence work was flawed, it would have been difficult to detect false records, misleading statements or material omissions in the disclosure documents even if the relevant procedures had been fully performed.”