New Chinese rules clamp down on illegal fundraising
Illegal fundraising in China could soon be a thing of the past, as the country has issued its first national regulations for private equity and venture capital investment.
The five-part regulation issued by the National Development and Reform Commission (NDRC) requires investors to be fully aware of the risks involved in making equity investments and to have the financial means to bear any prospective losses, China Daily reported.
It also enforces the pre-existing limit on the number of investors which can participate in each fund: 50 in a standard vehicle and up to 200 in one raised through a trust company.
Frank Han, executive director of Bohai Industrial Investment Fund Management, told the AVCJ Investment Summit in Hong Kong last month that there had been a lot of illegal fundraising from retail investors who don't fully understand the asset class. He warned that the government would step in if it continued.
AVCJ reported at the time that the NDRC was planning to require all funds with more than RMB500 million ($78 million) in assets to be registered - a policy which up to now has only existed on a pilot basis in certain regions.
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