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The aforesaid two articles *My Views on the Approaches for Lawyers to Represent Investor Suitability Dispute Cases (Part I and Part II)* have conducted a detailed analysis of the institutional system, legal nature and other issues concerning investor suitability obligations for private equity fund investors. This article will make further discussion on how lawyers can effectively represent parties in cases involving disputes over suitability obligations.

As mentioned above, China's judicial organs have not yet formed a unified opinion on the legal nature of the suitability obligation and the review criteria for the performance of such obligation at present. Under this premise, there is certain legal leeway for lawyers to represent cases involving disputes over suitability obligations.

I. Lawyers Acting as Litigation Agents for Investors

As litigation representatives of investors, lawyers shall clarify the specific circumstances of their clients, including the type and past experience of the investors, and whether the opposing party is a fund manager or a sales agency. They shall be familiar with all legal and regulatory provisions on suitability obligations, so as to identify an appropriate litigation breakthrough.

(I) Select the appropriate cause of action and dispute resolution method

Where the opposing party is the issuer, namely the manager, of a private equity fund, the cause of action may be selected as contract dispute for arbitration, or as tort liability dispute or property damage compensation dispute for litigation. The advantage of the former option is that arbitration complies with the dispute resolution method stipulated in the fund contract, so the arbitration application will not be rejected by the arbitration commission. Its disadvantage, however, is that arbitration follows the rule of one final award. If the arbitral award is unfavorable to the investor, the investor shall have no access to further remedies. The advantage of the latter option is that it can break through the restriction of the arbitration clause, while its disadvantage is that the lawsuit may be dismissed by the people's court. Where the opposing party is the distribution agency of the private equity fund, the cause of action may be selected as tort liability dispute or property damage compensation dispute for litigation.

(II) Specify the types of privately offered fund products distributed on an agency basis

As mentioned above, as of now, whether independent fund sales institutions are allowed to act as agents for the sale of private equity fund products is subject to further detailed rules or guiding provisions to be issued by the China Securities Regulatory Commission (CSRC). Where the product invested by the investor falls under the category of private equity fund products and the opposing party is an independent fund sales institution, the violation of relevant provisions in the agency sale of such products may be taken as the breakthrough point for litigation.

(III) Ascertain whether the seller institution has performed its suitability obligation.

Substantive examination shall be conducted to ascertain whether the selling institutions have genuinely fulfilled their suitability obligations.

1. Verify whether the seller institutions have a genuine understanding of their clients. Matters for examination include but are not limited to: whether the institutions require clients to fill in personal information questionnaires, conduct risk level assessment, classify investor types and require the production of differentiated asset certificates accordingly, and whether the asset certificates produced meet the relevant requirements.

2. Ascertain whether the selling institutions have full knowledge of their own products. Verify whether the selling institutions have conducted risk level classification for their products, understand the characteristics and risks of the fund products they issue or sell, and are capable of fully disclosing relevant information to clients.

3. Ascertain whether selling institutions have conducted risk matching between clients and products. Matters to be checked include inter alia whether selling institutions sell appropriate products to appropriate clients, issue the *Investor Risk Matching Notification and Investor Confirmation Letter* to clients, and issue a *Risk Warning Letter* and obtain confirmation from the investor when a client purchases a product with a risk level higher than the client's own risk rating.

4. Verify whether the selling institution has performed its obligation of disclosure and explanation. Specific matters include whether the selling institution has presented the Risk Disclosure Statement, Qualified Investor Commitment Letter and Investor Notification Letter, completed the dual audio and video recording process, and whether the cooling-off period and return visit procedures comply with relevant provisions, among others.

(IV) Verify the authenticity of both the information filled in the materials and the client's signature

In the financial wealth management industry, to meet their performance targets, wealth managers often fill out relevant materials including risk assessment questionnaires and risk matching notification letters on behalf of clients, and even sign the aforesaid materials for clients. As the attorney representing an investor, you shall verify with the client whether the aforesaid materials are filled out or signed by the client in person, and whether there is any inducement by the wealth manager. When necessary, you may file an application for handwriting identification with the court.

II. Lawyers Acting as Litigation Agents for Seller Institutions

As the agent ad litem of the seller institution, the lawyer shall also clarify the specific circumstances of the opposing party, be familiar with all legal provisions and regulatory provisions on suitability obligations, ascertain whether our client has performed the suitability obligation in form for different investors, and whether the unimplemented suitability procedures fall under the exemptions or grounds for exemption from liability as stipulated by law.

(I) Filing an Objection to Jurisdiction

Based on the plaintiff's cause of action, and in light of the fund contract and the specific circumstances of the case, file an objection to jurisdiction, and adopt a dispute resolution method or a court with jurisdiction that is favorable to the selling institution.

(II) Understanding the Implemented Suitability Obligations

Formal examination shall be adopted to ascertain whether the selling institution has fulfilled its suitability obligations. The examination shall focus on the following aspects: whether the investor has signed for confirmation of all relevant documents and materials; whether the failure to carry out risk assessment, dual audio and video recording and customer follow-up falls under the exemptions stipulated by laws. In the meantime, examination shall also be conducted to verify whether the circumstance falls into the exemption grounds specified in Article 78 of the *Minutes of the National Civil and Commercial Trial Work Conference*, namely, the customer intentionally provides false information and refuses to follow the advice of the selling institution, and given the customer's past investment experience and educational level, even if the selling institution fails to perform the suitability obligations, such failure does not affect the customer's independent decision-making.

III. Conclusion

In summary, although the *Minutes of the National Civil and Commercial Trial Work Conference* has put forward the principle of "sellers fulfill their due diligence obligations and buyers bear their own risks", China's judicial organs have not yet reached a unanimous consensus on issues including the legal nature of suitability obligations and the review criteria for the performance of such obligations. This makes it impossible to fully realize the social effect of guiding financial institutions to effectively perform their suitability obligations through judicial judgments. The performance of suitability obligations is the core content of "sellers fulfilling their due diligence obligations", and also the premise and foundation of "buyers bearing their own risks". Only when relevant concepts and issues are clearly defined can both sellers and buyers assume sole responsibility for their own profits and losses.