Chinese regulator issues guidelines for domestic PE
The China Securities Regulatory Commission (CSRC) has issued draft rules for the domestic private equity industry, including a definition of investors qualified to participate in funds.
The rules, which have yet to be finalized, impose oversight on privately-offered securities funds or "sunshine funds;" private equity funds; venture capital funds; and specialist funds such as wine and art funds.
Investors - including institutional and individual investors committing more than RMB1 million to a privately-offered fund - must meet at least one of three criteria to qualify as LPs: have at least RMB10 million ($1.6 million) in net assets; have individual financial household assets of at least RMB3 million; or have an average annual individual income of at least RMB500,000 in the last three years.
China's National Social Security Fund (NSSF), Chinese enterprises, charitable organization and other authorized institutional investors are qualified to bear the risk of participating in private equity funds.
The draft rules also prohibit fund managers from illegal fundraising. They are not allowed to promote private fund products to "non-qualified investors" through public forums, brochures, e-mails, mobile messages or microblogging. Furthermore, they can't offer assurances that investments will not incur losses or guarantee any specific returns.
The Asset Management Association of China (AMAC), a group set up by the CSRC, announced rules addressing domestic private equity firms' record management, operational standards and information disclosure in January of this year. All Chinese private equity fund managers are required to register with the AMAC.
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