Tentative Measures for the Regulation of Private Investment Funds

Article 2: For the purposes of these Measures, the term “private investment fund” (Private Fund) means an investment fund established in the People's Republic of China by raising funds from investors in a non-public manner.

Private Fund property shall be invested in investment targets that include the trading of stocks, equity, bonds, futures, options, fund shares and other targets specified in the investment contract.

Where the assets of a company or partnership established with privately raised funds for the purpose of engaging in investment activities are managed by a fund manager or general partner, these Measures shall apply to the registration/record filing of, raising of funds by, and the investment operations of, such company or partnership.

These Measures shall apply to the engagement in the Private Fund business by securities companies, fund management companies, futures companies and their subsidiaries, and if other laws, regulations or relevant provisions of the China Securities Regulatory Commission (the CSRC) provide otherwise in respect of the engagement in the Private Fund business by the aforementioned firms, such provisions shall apply.

Article 3: To engage in the Private Fund business, the principles of free will, fairness and good faith shall be complied with, the lawful rights and interests of investors shall be safeguarded and the interests of the state and the public may not be prejudiced.

Article 4: Private Fund managers and institutions that engage in Private Fund custody business (Private Fund Custodians) in managing and applying Private Fund property, institutions that engage in the Private Fund sales business (Private Fund Sellers) and other private offer service institutions in engaging in Private Fund service activities shall scrupulously fulfil their duties and perform their obligations of good faith and due diligence.

Private Fund personnel shall observe laws and administrative regulations and scrupulously abide by professional ethics and codes of conduct.

Article 5: The CSRC and its agencies shall regulate the Private Fund business activities in accordance with the Securities Investment Fund Law, these Measures and other relevant CSRC provisions.

The establishment of Private Fund management institutions and the offering of Private Funds shall not be subject to administrative examination and approval. The various types of offering entities shall, on the basis of lawfulness and compliance, be permitted to offer Private Funds to investors the number of which, in the aggregate, does not exceed that specified in law. A Private Fund offering regulatory system shall be established and improved, during- and after-the-event regulation shall be duly strengthened, and illegal fund raising activities done in the guise of Private Funds shall be strictly cracked down upon in accordance with the law.

Management systems for risk control and self-regulation that promote the compliant engagement in the Private Fund business by operating institutions and a uniform monitoring system for the various types of Private Funds shall be established.

Article 6: The Asset Management Association of China (AMAC) shall carry out industry self-regulation in respect of the Private Fund industry, harmonise industry relations, provide industry services and promote the development of the industry in accordance with the Securities Investment Fund Law, these Measures, other relevant CSRC provisions and its own self-regulation rules.

Part Two: Registration and record filing

Article 7: Managers of different Private Funds shall apply to AMAC for registration and submit the following basic information in accordance with AMAC provisions:

(1) photocopies of the originals and duplicates of its business registration and business licence;

(2) its articles of association or partnership agreement;

(3) a list of its major shareholders or partners;

(4) the basic particulars of its senior management personnel; and

(5) other information as specified by AMAC.

AMAC shall complete the registration procedures for the Private Fund manager within 20 working days after all of the registration materials of the Private Fund manager being in order by posting the list and basic particulars of Private Fund managers on its website.

Article 8: Once the offering of a Private Fund has been completed, the Private Fund manager shall carry out fund record filing procedures and submit the following basic information in accordance with AMAC provisions:

(1) the main investment orientation and the fund type as indicated based on the main investment orientation;

(2) the fund contract and the articles of association or partnership agreement; if a prospectus was provided to the investors in the course of the offering, the prospectus shall be submitted; a private fund established in the form of a company, partnership or other such form shall additionally submit photocopies of the originals and duplicates of its business registration and business licence;

(3) if the entrusted management method is adopted, the entrusted management agreement shall be submitted; if a custodian is engaged to have custody of the fund property, the custody agreement shall additionally be submitted; and

(4) other information as specified by AMAC.

AMAC shall complete the record filing procedures for the Private Fund within 20 working days after all of the Private Fund record filing materials are in order by posting the list and basic particulars of Private Funds on its website.

Article 9: The registration or record filing of a Private Fund manager or Private Fund by AMAC shall not constitute an endorsement by AMAC of the Private Fund manager's investment capabilities or continuing compliance, and shall not serve as a guarantee of the safety of the fund property.

Article 10: If a Private Fund manager is dissolved in accordance with the law, is closed down in accordance with the law or is declared bankrupt in accordance with the law, its legal representative or general partner shall report the same to AMAC within 20 working days, and AMAC shall cancel the Private Fund manager's registration in a timely manner and announce the same on its website.

Part Three: Qualified investors

Article 11: A Private Fund shall be offered to qualified investors, and the aggregate number of investors in a single Private Fund may not exceed the specific number specified in laws such as the Securities Investment Fund Law, the Company Law and the Partnership Law.

When an investor transfers fund shares, the transferee shall be a qualified investor and the number of investors after the acquisition of the fund shares shall comply with the preceding paragraph.

Article 12: The term “qualified investor of a Private Fund” means an entity or individual who has the attendant capacity to identify and bear risks, invests not less than Rmb1 million in a single Private Fund and satisfies the following relevant criterion:

(1) an entity with net assets of not less than Rmb10 million; or

(2) an individual with financial assets of not less than Rmb3 million or whose average annual income during the most recent three years is not less than Rmb500,000.

The term “financial assets” in the preceding paragraph includes bank deposits, stocks, bonds, fund shares, asset management plans, bank wealth management products, trust plans, insurance products and futures interests.

Article 13: The following investors shall be deemed qualified investors:

(1) old-age funds such as social security funds and enterprise annuities, and social welfare funds such as charitable foundations;

(2) investment plans that have been lawfully established and placed on the record with AMAC;

(3) Private Fund managers that invest in the Private Funds under their management and their business personnel; and

(4) other investors as specified by the CSRC.

Where funds from a number of investors are pooled in the form of a partnership, contract or other such non-legal person form and directly or indirectly invested in a Private Fund, the Private Fund manager or Private Fund Seller shall conduct a thorough review to determine whether the ultimate investor is a qualified investor and calculate the number of investors together. However, where an investor complying with Item (1), (2) or (4) of this Article invests in a Private Fund, no thorough review to determine whether the ultimate investor is a qualified investor or combined calculation of the number of investors shall be carried out.

Part Four: Fund raising

Article 14: A Private Fund manager or Private Fund Seller may not make an offering to an entity or individual other than a qualified investor, nor may it publicise or promote such offering to non-specific targets through mass media such as newspapers, periodicals, radio, television or the internet or by means such as forums, symposiums, workshops or bulletin boards, leaflets, mobile text messages, WeChat, blogs or e-mail.

Article 15: A Private Fund manager or Private Fund Seller may not undertake to investors that their principal will not suffer loss or give them an undertaking of minimum returns.

Article 16: Where a Private Fund manager sells the Private Fund itself, it shall assess the risk identification and bearing capacity of investors by way of a questionnaire or other such means, and investors shall undertake in writing that they satisfy the qualified investor conditions. A risk disclosure shall be prepared that shall be signed in confirmation by the investors.

Where a Private Fund manager engages a sales institution to sell the Private Fund, the Private Fund Seller shall adopt the assessment and confirmation measures specified in the preceding paragraph.

The guidelines for the contents and format of investor risk identification and bearing capacity questionnaires and risk disclosures shall be formulated by AMAC based on the features of the different types of Private Funds.

Article 17: When a Private Fund manager itself sells or engages a sales institution to sell a Private Fund, it shall itself carry out a risk rating of the Private Fund and promote the Private Fund to investors with matching risk identification and risk bearing capacity, or engage a third party institution to do so.

Article 18: An investor shall truthfully complete the risk identification and risk bearing capacity questionnaire, give a true undertaking as to its/his/her assets or income, and be liable for the truthfulness, accuracy and completeness thereof. If fraudulent information or a fraudulent undertaking document is provided, the attendant liability shall be borne.

Article 19: An investor shall ensure that the provenance of the investment funds is lawful, and may not illegally pool the funds of others to invest in a Private Fund.

Part Five: Investment operations

Article 20: When offering a private securities fund, a fund contract and articles of association or a partnership agreement (hereafter collectively referred to as the “Fund Contract”) shall be prepared and executed. The Fund Contract shall comply with Articles 93 and 94 of the Securities Investment Fund Law.

When offering another type of Private Fund, reference shall be made to Articles 93 and 94 of the Securities Investment Fund Law for the Fund Contract, which shall expressly set forth the rights and obligations of the concerned parties and relevant matters.

Article 21: Unless otherwise provided in the Fund Contract, the fund custodian shall have custody of the Private Fund.

If the Fund Contract provides that the Private Fund will not be held in custody, the systems and measures for ensuring the safety of the Private Fund property and the dispute resolution mechanism shall be expressly specified in the Fund Contract.

Article 22: If a Private Fund manager manages different types of Private Funds, it shall adhere to professional management principles. Where different funds that could lead to the funneling of interests or a conflict of interests are being managed, a mechanism to guard against such funneling of interests or conflict of interests shall be established.

Article 23: When a Private Fund manager, Private Fund Custodian, Private Fund Seller or other private offer service institution and its business personnel engage in the Private Fund business, they may not:

(1) mix their own property or that of others with the fund property to carry out investment activities;

(2) treat the property of different funds under their management in an unequal manner;

(3) use fund property or the advantages of their position to seek gains for themselves or persons other than the investors or carry out the funneling of interests;

(4) misappropriate or divert fund property;

(5) disclose non-public information to which they are privy as a result of their duties, or utilise such information to engage in or to expressly or implicitly instruct another to engage in relevant trading activities;

(6) engage in investment activities that prejudice fund property and the interests of investors;

(7) be derelict in their duties, or fail to perform their duties in accordance with provisions;

(8) engage in insider trading, the manipulation of trading prices or other unfair trading activities; or

(9) other acts as prohibited by laws, administrative regulations and CSRC provisions.

Article 24: A Private Fund manager and Private Fund Custodian shall, in accordance with the contract, truthfully disclose to investors the fund investments, assets and liabilities, distribution of investment returns, expenses and performance remuneration borne by the fund, potential conflicts of interest and other material information that could have an impact on the investors' lawful rights and interests, and they may not withhold information or provide false information. The rules for information disclosure shall be formulated separately by AMAC.

Article 25: A Private Fund manager shall, in accordance with AMAC provisions, provide in a timely manner and regularly update relevant information on itself and its business personnel, details on the investment operations of the Private Funds under its management and details on its use of leverage, and ensure that the information it provides is true, accurate and complete. If a material event occurs, it shall report the same to AMAC within 10 working days.

A Private Fund manager shall submit to AMAC its annual financial reports audited by an accounting firm and basic information on the investment operations of the Private Funds under its management within four months after the end of each financial year.

Article 26: A Private Fund manager, Private Fund Custodian and Private Fund Seller shall duly keep records and other relevant information on Private Fund investment decisions, trading and management of investor suitability, etc. for a period of not less than 10 years from the date of liquidation and ending of the fund.

Part Six: Industry self-regulation

Article 27: AMAC shall establish an information system for the management of Private Fund manager registration and Private Fund record filing.

AMAC shall maintain strict confidentiality of Private Fund manager and Private Fund information. Unless otherwise provided in law, it may not disclose the same to third parties.

Article 28: AMAC shall establish a mechanism for sharing information with the CSRC, its agencies and other relevant authorities, regularly summarise and analyse the Private Fund situation and provide relevant information on Private Funds in a timely manner.

Article 29: AMAC shall formulate and implement Private Fund industry self-regulation rules, and monitor and inspect the practice acts of members and their business personnel.

If a member or any of its business personnel violates a law, a set of administrative regulations, these Measures or the AMAC self-regulation rules, AMAC may take self-regulation administrative measures depending on the seriousness of the circumstances, and disclose information on the relevant violation of the law or regulations on its website. If a member or any of its business personnel is suspected of violating a law or regulation, AMAC shall report the same to the CSRC in a timely manner.

Article 30: AMAC shall establish a complaint handling mechanism, accept complaints from investors and mediate disputes.

Part Seven: Regulation

Article 31: The CSRC and its agencies shall carry out statistical monitoring and inspections of the engagement in the Private Fund business by Private Fund managers, Private Fund Custodians, Private Fund Sellers and other private offer service institutions in accordance with the law and take relevant measures in accordance with Article 114 of the Securities Investment Fund Law.

Article 32: The CSRC will input information on the integrity of Private Fund managers, Private Fund Custodians, Private Fund Sellers, other private offer service institutions and their business personnel in the integrity file database of securities and futures markets, and subject Private Fund managers to differentiated regulation based on their integrity status.

Article 33: If a Private Fund manager, Private Fund Custodian, Private Fund Seller or other private offer service institution or any of its business personnel violates a law, a set of administrative regulations or these Measures, the CSRC or its agency may take administrative regulatory measures such as ordering rectification of the matter, giving a regulatory lecture, issuing of a letter of warning or delivering a public reprimand.

Part Eight: Special provisions on venture capital funds

Article 34: For the purposes of these Measures, the term “venture capital fund” means an equity investment fund that mainly invests in equity of unlisted venture enterprises such as common shares, preference shares that can be converted into common shares in accordance with the law and convertible bonds.

Article 35: Venture capital funds are encouraged and guided to invest in micro and small enterprises in the early period after their establishment.

The scope of investment of venture capital funds that enjoy state fiscal and tax support policies shall comply with relevant state provisions.

Article 36: At stages such as fund manager registration, fund record filing, investment situation reporting requirements and member management, AMAC shall carry out industry self-regulation of venture capital funds that differs from that for other Private Funds, and provide them with differentiated member services.

Article 37: At stages such as inspection of the investment orientation of venture capital funds, the CSRC and its agencies shall exercise regulation that differs from that for other Private Funds, and in terms of account opening, offering, trading and divestment, shall provide facilitating services for venture capital funds.

Part Nine: Legal liability

Article 38: If a Private Fund manager, Private Fund Custodian, Private Fund Seller or other private offer service institution or any of its business personnel violates Article 7, 8, 11, 14 to 17 or 24 to 26 hereof or commits any of the acts set forth in Items (1) to (7) or (9) of Article 23 hereof, it/he/she shall be ordered to rectify the matter, given a warning and fined up to Rmb30,000, and the managing officer directly in charge and other directly responsible persons shall be given a warning and fined up to Rmb30,000. If a Private Fund manager, Private Fund Custodian, Private Fund Seller or other private offer service institution or any of its business personnel commits the act set forth in Item (8) of Article 23 hereof, it/he/she shall be penalised in accordance with relevant provisions of the Securities Law and the Regulations for the Administration of Futures Trading (Revised). If a criminal offence is constituted, the case shall be transferred to the judicial authority for pursuit of criminal liability in accordance with the law.

Article 39: If a Private Fund manager, Private Fund Custodian, Private Fund Seller or other private offer service institution or any of its business personnel violates a law, a set of regulations or these Measures, and the circumstances thereof are serious, the CSRC may bar the relevant responsible persons from the market.

Article 40: If a privately offered securities investment fund manager or any of its business personnel violates relevant provisions of the Securities Investment Fund Law, it/he/she shall be penalised in accordance with the relevant provisions of the Securities Investment Fund Law.

Part Ten: Supplementary provisions

Article 41: These Measures shall be effective as of the date of promulgation.