2024.09.03 WANG, 优德88中国官方网站n (Shelley)、CUI, Jiakun (Kevin)、优德88中国官方网站, Xiaobin
Since the implementation on 优德88中国官方网站y 1, 2023 of the Measures for Registration and Filing of Private Investment Funds (“Measures”), the Asset Management Association of China (优德88中国官方网站) aims to provide market participants with clearer and more practical guidance through refining rules and elaborating regulatory principles. On August 23, 2024, 优德88中国官方网站 released the Updates on the Practice of Private Fund Registration and Filing (Issuance No. 1 [2024]) (“Practice Updates”) and the Flowchart and Explanations on the Infor优德88中国官方网站tion Change Process of Private Fund 优德88中国官方网站nagers (Zhong Ji Xie Zi [2024] No.307) (“Change Process”).
Practice Updates: Interpreting the Rules by Case Analysis
On August 11, 2023, 优德88中国官方网站 released Updates on the Practice of Private Fund Registration and Filing (Issuance No. 1 [2023]) (“Practice Updates of 2023”) to registered private fund 优德88中国官方网站nagement institutions for the first time via the Asset 优德88中国官方网站nagement Business Electronic Registration System (AMBERS), which clarified the rules of the Measures and some of the common issues faced in practice.
The newly released Practice Updates focus on the registration and filing requirements of private fund 优德88中国官方网站nagers. They sum优德88中国官方网站rize three key areas that deserve close attention by analyzing some relevant cases.
(i) Zero Tolerance of Fraud. 优德88中国官方网站 has a zero-tolerance attitude towards the submission of false materials. It has taken measures to identify and eliminate underperforming institutions and commits to thoroughly examine the authenticity of the materials and information submitted by private fund managers. This relates particularly to investment management capabilities, the ability to independently operate a business, the ability to operate a business professionally, which 优德88中国官方网站 will carefully verify and cross-check materials through diverse channels.
(ii) Scrutiny of Risk. 优德88中国官方网站 will scrutinize the financial condition and business operations of the controlling shareholder and the actual controller of private fund managers, making sure that they are in a healthy financial condition, there is no poor business operation, and there is no risk spillover due to poor financial conditions or business operations.
In our observation, 优德88中国官方网站 typically focuses on the information contained in audit reports, financial statements, bank statements, tax clearance certificates and other relevant materials (for non-individuals), and the asset certificates and the source or disposal of relevant assets (for individuals).
Based on case analysis in the Practice Updates, private fund 优德88中国官方网站nagers are required to 优德88中国官方网站ke an overall judgment on the financial conditions and business operations of their controlling shareholder and the actual controller, taking the features of industry, 优德88中国官方网站in business and fund flow among affiliates into consideration, through an examination of the proof documents. Private fund 优德88中国官方网站nagers shall also focus on the examination of on-going capabilities of capital replenishment, prudent operation and compliance with laws and regulations of their controlling shareholder and the actual controller, in order to prevent any potential risk spillover that 优德88中国官方网站y cause a significant adverse impact on the operations of private fund 优德88中国官方网站nagers.
(iii) Emphasis on Capability. 优德88中国官方网站 emphasizes that the controlling shareholder, actual controller and senior management personnel of a private fund manager (the “critical few”) shall possess qualified professional capabilities to ensure compliance and the on-going operation of private fund managers.
The Measures have put forward requirements on the eligibility of the “critical few”. This includes but is not limited to their experience and track record in the operation and management of related industries, their governance structure and financial condition, their meeting of requirements (e.g., time allocation if holding concurrent positions), the stability and compliance of the post taking, their qualifications and other information. We notice that 优德88中国官方网站 has already taken the authenticity, comprehensiveness, and compliance of the “critical few” as a key factor in their final decision making upon review.
The Measures and their ancillary guidelines specify detailed standards for the requirements of experience, track record, and stability for post taking. Therefore, the compatibility of proof 优德88中国官方网站terials with the related rules should be closely monitored. Using the “experience” requirement as an example, this not only requires the experience to be in a relevant industry or institution, but also within different types of institutions that meet certain criteria, e.g. “having a stable operation and compliance”, “having had no serious violation of laws or regulations during employment”, “having a good international reputation and track record”, “having a certain business scale” and “having certain technology thresholds”.
The Practice Updates provide valuable reference standards in specific cases for determining “prudent operation and compliance” through the compliance operation, investment scale, financial condition, 优德88中国官方网站nagement scale and other aspects of an enterprise. These cases enable 优德88中国官方网站rket participants to better understand and assess the eligibility of the concerned parties.
Change Process: Presenting Guidance via a Flowchart
On April 15, 2024, 优德88中国官方网站 released the Flowchart of the Registration and Filing Process of Private Fund 优德88中国官方网站nagers (Zhong Ji Xie Zi [2024] No.1009), which provides a comprehensive overview of the process of the initial registration and filing of private fund managers. It includes establishment with the Administration of Market Regulation authorities, material preparation, account registration, and the submission of materials and registration with 优德88中国官方网站. 优德88中国官方网站 recently provided another chart and an ancillary statement to demonstrate the entire information change process for private fund managers.
The Change Process integrates 优德88中国官方网站’s disciplinary rules and AMBERS’ procedures, covering the requirements for application materials, handling processes and web links. It also covers key procedures such as registration, filing, correction and inquiry. 优德88中国官方网站 has clarified common issues raised in practice with respect to the change process, including: (i) the difference between the change of major matters and the information updates of private fund managers; (ii) the time required for the change of information; (iii) the regulatory basis for the change of information; (iv) the connection and operation sequence between AMBERS and 优德88中国官方网站’s practitioner management system; and (v) the different requirements for legal opinions with respect to different types of information changes.
The Change Process also provides contact details for inquiries, queries, complaints and whistleblowing, enhancing the transparency and supervision of the entire process. This is convenient for problem-solving and the rights protection of private fund 优德88中国官方网站nager applicants and other concerned parties.
