China GPs face tighter disclosure rules

New draft regulation from the CSRC will oblige all private equity funds to register with the regulator

The China Securities and Regulatory Commission (CSRC) has released new draft regulation that tightens the grip on private equity funds in China.

The new rules state that all private equity vehicles will have to register with the Asset Management Association of China, an industry organisation within the CSRC, and disclose information including their investment portfolios, assets and debts, revenue distribution and fund manager compensation, local media has reported.

Private equity firms will be expected to disclose potential conflicts of interests of events that may have a significant impact on their investors, which are also required to have at least $1.6 million in net assets, as well as meeting other income-related thresholds.

Moreover, the new rules establish limits on fund marketing, including the prohibition of promoting private equity funds to “non-qualified investors” through public forums, brochures and e-mails or mobile messaging. This is intended to correct the danger of private equity funds raising capital from the general public uneducated about the risk involved in this type of investing, a problem that was rife in China a few years ago. 

The CSRC was established as the official private equity regulator in China last year, since indicating it will impose harsher regulatory requirements on investment funds than its predecessor the National Development and Reform Commission.

These new regulations have been raised just a few months after appointing Ziqiang Chen to head the CSRC’s newly-established private equity supervision office amid a restructuring of the regulator’s supervisory departments, Private Equity International reported earlier.