China tightens domestic private fund supervision
The Asset Management Association of China (AMAC), a self-regulatory organization for the PE industry set up by the securities watchdog, has tightened rules on domestic fund managers’ registration, with a view to cracking down on financial scams.
The industry body said in a statement that it will revoke the registration of new private fund firms if they don't launch actual products within six months of registration. For those that have been registered for more than one year, licenses will be cancelled if new investment products are not launched by May 1.
In addition, the association will no longer issue registration certificates for new entrants, following allegations that some managers used this certification to inflate their credibility and mislead investors. Results of successful registration will only be shown on AMAC's website.
AMAC said 69% of China's 25,841 registered private fund firms have yet to launch any actual fund products. Rather, they operate businesses that are irrelevant to private fund investment, such as investment banking, peer-to-peer (P2P) lending, crowd-funding, private loans and loan guarantors. Some fund managers are involved in illegal fundraising.
This tightening is the latest regulatory crackdown on illegal fundraising by domestic private fund managers. Last month, the Beijing government suspended new private equity investment registration.
Last week, Xinhua News Agency reported that Ezubao, one of China's largest P2P lending platforms, collected RMB50 billion ($7.6 billion) in less than two years from about 900,000 investors through the promise of high returns. The online platform is a Ponzi scheme, with 95% of its investment projects fake, the report said.
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