The Impact of the Regulation on the Supervision and Administration of Private Investment Funds

Summary

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• For some time, private investment funds have been supervised and under a complex system of laws, regulations and opinions
• This has led to uncertainty, poor performance and in some cases lack of compliance
• A new Regulation promulgated by the State Council aims to clarify the definition of relevant funds and dramatically streamline the regulatory framework
• The Regulation also paves the way for the issuance of more detailed rules with the goal of continuous improvement of this industry

On July 9, 2023, the State Council promulgated the Regulation on the Supervision and Administration of Private Investment Funds (the "Regulation") (私募投资基金监督管理条例), which will come into effect on Sept. 1, 2023.

Before the promulgation of the Regulation, the supervision system of private equity funds in China was mainly composed of three levels of rules. This included the PRC Securities Investment Fund Law (中华人民共和国私募投资基金法) at the legislative level; the Interim Measures for the Supervision and Administration of Private Investment Funds (私募投资基金监督管理暂行办法) and the Several Provisions on Strengthening the Regulation of Private Investment Funds (关于加强私募投资基金监管的若干规定) (promulgated by the China Securities Regulatory Commission ("CSRC")) at the ministerial level; and the jointly-promulgated Guiding Opinions on Regulating the Asset Management Business of Financial Institutions （关于规范金融机构资产管理业务的指导意见） at departmental level. In addition, China's private fund supervision system is largely made up of a series of industrial self-discipline rules issued by the Asset Management Association of China ("AMAC") (including the Measures for the Registration and Record Filing of Private Investment Funds （私募投资基金登记备案办法） and its supporting guidelines as well as a series of Q&As, notices and announcements).