The "Regulations on the Supervision and Administration of Private Equity Investment Funds" was officially announced and will come into force on September 1, 2023. The "Regulations" has 7 chapters and 62 articles, focusing on the following contents.
One is to clarify the scope of application. Private equity investment funds of different organizational forms such as contractual, corporate, and partnership are included in the scope of application, and it is stipulated that non-public means of raising funds, establishment of investment funds, or legal establishment of companies and partnerships for the purpose of investment activities shall be carried out by private equity funds. Managers or general partners manage and conduct investment activities for the benefit of investors, and these Regulations apply.
The second is to clarify the obligations of private equity fund managers and custodians. Clarify the circumstances under which private equity fund managers and their controlling shareholders, actual controllers, directors, supervisors, senior managers, and other related subjects are not allowed, and clarify that practitioners should receive compliance and professional training in accordance with regulations. It is stipulated that private equity fund managers shall perform registration procedures with institutions entrusted by the securities regulatory authority of the State Council in accordance with the law, and clarify the circumstances of cancellation of registration. List the prohibited behaviors of shareholders, actual controllers, and partners of private equity fund managers, and clarify the requirements that private equity fund managers should continue to meet. Clarify the responsibilities of private equity fund managers and private equity fund custodians.
The third is to standardize fund raising and investment operations. Private equity investment funds shall be raised or transferred to qualified investors, and the cumulative number of investors of a single private equity investment fund shall not exceed the number prescribed by law. Private equity fund managers should match private equity investment fund products with different risk levels according to investors' risk identification ability and risk bearing ability. Strengthen the supervision and monitoring of private investment funds after they are raised. Clarify the scope of property investment of private equity investment funds and the businesses that cannot be operated, and stipulate the investment levels of private equity investment funds. Regulate the behavior of private equity fund managers and their practitioners.
Fourth, special provisions are made for venture capital funds. The state provides policy support to venture capital funds to encourage and guide them to invest in growing and innovative start-ups. Strengthen the coordination and cooperation between supervision and management policies and development policies, clarify the conditions that venture capital funds should meet, and implement differentiated supervision and management and self-discipline management for venture capital funds that are different from other private equity investment funds.
The fifth is to strengthen supervision and management and legal responsibility. It is stipulated that the supervision and management of private investment fund business activities shall implement the party and state's guidelines, policies, and decision-making arrangements. Clarify the regulatory responsibilities and regulatory measures of the securities regulatory agency of the State Council. It is stipulated that the securities regulatory agency of the State Council, in conjunction with relevant departments of the State Council and provincial people's governments, shall establish a coordination mechanism for private equity investment fund supervision and management information sharing, statistical data submission, and risk disposal. In addition, the legal responsibility for violating this regulation is clearly stipulated.
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