Legal dilemma over Lin's death plunge

THE rapid and often chaotic development of China's capital markets has created some peculiar problems for the country's legal system, perhaps none more bizarre than the case of Lin Jianhua.

A big time speculator on the Shanghai Securities Exchange, Mr Lin jumped to his death from the 11th floor of a Hangzhou office building last November after losing more than 500,000 yuan (about HK$442,700) playing the market.

But while shareholders leaping off tall buildings is already something of a cliche, what happened next was rather unusual, to say the least.

Mr Lin's widow, Xu Lanfang, decided to sue her late husband's brokerage house, accusing it of encouraging his reckless speculation by providing him with credit in direct contravention of the Government's provisional regulations on stock trading.

As compensation, Ms Xu demanded 378,000 yuan from the brokerage, Zhejiang International Credit and Investment, just sufficient to pay off her late husband's debts.

The Shanghai Legal Daily newspaper, which reported the case, claimed that a number of young brokers at Zhejiang International Credit and Investment did provide Mr Lin with an overdraft to buy stocks but said there was no sinister motive, just a simple desire to ''serve the customer''.

Ms Xu alleged, however, that the desire to serve the customer went too far when, just days before his death, her husband was allowed to buy more than 400,000 yuan worth of Yanzhong stock with just over 46,000 yuan in his account.

The brokerage then went further and sold Mr Lin's stock in order to recoup its financing, Ms Xu's law suit alleges.

Zhejiang International Credit and Investment countered that it was forced to liquidate Mr Lin's holdings because he had persistently failed to come up with the money promised for the initial trade.

What the Hangzhou courts will make of all this is anybody's guess. Even if the panel of three judges understand the technical complexities of the case, they will find it very difficult to determine whether the broker lured Mr Lin into a life of reckless speculation, or if it was Mr Lin who conned the broker into making the trades without having sufficient funds.

And even if the broker was at fault in providing Mr Lin credit, should it be required to compensate his widow for his losses? There seems to be no precedent for any of these questions in China's judicial system and the judges will have a hard time coming to any conclusions.

Just about the only conclusion which can be drawn from the incident is that playing the stock market in China can be hazardous to your health.

It appears that Mr Lin, 37, became carried away with the idea of being a ''big shot'' in the market, some days trading stocks worth in excess of one million yuan, without thinking the money could disappear as quickly as it came.

Shanghai Securities Exchange officials insist that investors, particularly in Shanghai itself, are becoming more sophisticated and are looking for sound long-term investments rather than just a quick speculative killing.

However, there are clearly still huge numbers of diehard gamblers out there willing to take enormous risks to make a quick buck, and there will undoubtedly be more cases like Mr Lin's before the stock market finally obtains some semblance of normality.