China to include PE in new securities fund law

A draft of the revised Securities Investment Fund Law has been completed and was submitted to the State council for discussion, according to Xianglong Dai, head of the National Council for Social Security Fund (NSSF), who was quoted by Shenzhen-based Securities Times.

Under the current regulatory regime, the law does not allow individuals working in the mutual fund industry to trade stocks themselves. Private equity funds, however, are not included and have been operating in a legal gray area.

A revised law has been under discussion for years, especially since the launch in 2009 of China's second board for start-up companies, which significantly increase the local appetite for pre-IPO investments through private equity funds.

China's regulations for private equity in general are still relatively weak, largely depending on a tacit agreement among LPs and GPs to exercise self discipline. Dai said the coming regulations should place emphasis on funds' management structures, profit-sharing mechanisms and transparency.

He forecasts that the private equity market will grow to as much as RMB1 trillion ($159 billion) in five years. Last year, total investment in PE funds reached RMB252.6 billion, with NSSF alone investing RMB19.5 billion.

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• Topics
• Regulation
• Greater China
• China
• regulation
• NSSF