The second trial has commenced in the securities misrepresentation liability dispute case involving Longli Biotech. Guolian Minsheng Securities announced that its wholly-owned subsidiary, Guolian Minsheng Underwriting and Sponsorship Co., Ltd., has appealed the first-instance judgment. The Shandong High Court has formally accepted the case.

In the initial ruling by the Jinan Intermediate Court, Guolian Minsheng Underwriting was ordered to bear 5% of the total compensation amounting to 275 million yuan, approximately 13.75 million yuan, along with a proportional share of the case acceptance fees. The appeal seeks to overturn this ruling and dismiss all investor claims.

The lawsuit originated from allegations that Longli Biotech engaged in financial fraud, causing losses to investors. Over 1,600 investors filed the case in 2021, naming multiple parties including the underwriting sponsor. Guolian Minsheng's subsidiary argues it fulfilled due diligence obligations and lacked subjective fault, thus should not be held liable.

Financially, the potential compensation represents only 0.78% of Guolian Minsheng's net profit for the first three quarters of 2025, which reached 1.763 billion yuan, indicating limited immediate impact. The company has made provisions for the contingent liability according to accounting standards.

However, reputational risks persist. Guolian Minsheng's investment banking business has been a key growth driver, with net fee income surging 160.77% year-over-year. The case highlights challenges in managing historical compliance risks from acquired entities, as the subsidiary's involvement stems from pre-merger operations.

This litigation reflects broader industry issues concerning intermediary accountability in China's capital markets. Regulatory emphasis on gatekeeper responsibilities has intensified, making compliance critical for underwriters. The case underscores the need for thorough risk assessment during mergers and robust post-acquisition integration of control systems.

While the direct financial exposure appears manageable for Guolian Minsheng, the outcome may influence how intermediaries address legacy liabilities and strengthen internal governance frameworks amid evolving regulatory expectations.