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Original title: Regulator reiterates basic requirements to guide private equity industry back to its roots.
Our reporter Wu Xiaolu
On January 8, the China Securities Regulatory Commission issued the “Regulations on Strengthening the Supervision of Private Investment Funds” (hereinafter the “Regulations”). Industry experts believe that the “Regulations” provide detailed and clear definitions of problems in the private equity industry in practice, which will help guide private equity fund managers and professionals to establish a sense of profitability. and compliance, and promote the return of the private equity industry to “private equity” AND the origin of “investment.” In the future, regulatory authorities are expected to further increase penalties for violations of laws and regulations in the private equity industry and promote high-quality development of the private equity industry by strengthening supervision.
Reinforce the private placement of the surname “private”
Guide the industry back to its roots
In recent years, the private equity industry has developed rapidly and the number and scale of private equity funds have grown steadily. At the end of 2020, there were 24,600 registered private equity fund managers, a 0.53% year-on-year increase, 96,800 private equity funds had been registered, an 18.43% year-on-year increase, and the management scale was 15, 97 trillion yuan, a year-on-year increase of 16.24%.
“The rapid development of the private equity fund industry is accompanied by various chaos, including public or covert public fundraising, circumvention of qualified investor requirements, non-compliance with registration and filing obligations, group operations complicated, capital pool operations, interest transfer, The industry risk has gradually emerged. In recent years, the typical risk events represented by the Fuxing Department and the Jincheng Department have caused serious interest violations of investors, such as embezzlement, misappropriation of fund properties and illegal fundraising. Reputation and benign ecology have a significant negative impact, “said the person in charge of the Securities Regulatory Commission of China.
Zhang Yingbiao, chairman of Jingtai Lifeng Asset Management Co., Ltd., told a Securities Daily reporter that in response to the aforementioned problems in the private equity industry, the “Regulations” have made clearer provisions. The prohibitive “ten must not” requirements will help the profitability of the private equity industry. The origin of “private capital” and “investment” seeks the development of standards and gradually establishes a mature market-oriented credit system to protect the interests of investors to the greatest extent possible.
“The ‘Regulations’ once again strengthened the surname of ‘private’ private equity, which cannot promote or raise funds publicly, and clearly stipulates the name of the private equity fund,” said the director of the Haomai Fund Research Center, Zeng Linghua, to the “Securities Daily” reporter, regulatory requirements The more detailed, the clearer the definition of the boundaries of the private equity industry, the more conducive to the development of industry standards, and the focus of supervision also may be more concentrated.
Tian Lihui, dean of the Financial Development Institute at Nankai University, said in an interview with a Securities Daily reporter that the most important thing in the Regulations is to require the private equity industry to return to the origin of “private equity” and “investment”. The “Regulation” focuses on guiding private equity funds to reinvest in securities, equity investments, etc., reiterates the essence of “profit sharing and risk” in investment activities and prohibits strictly the use of fund assets to participate in capital funds other than private equity, such as loans (deposits), guarantees and real debts on public shares. For investment activities, it is strictly prohibited to invest in assets similar to credit or the right to receive (receive) benefits, make investments with unlimited liability and participate in projects that do not comply with national industrial policies, environmental protection policies and regulations. land management policies.
To facilitate the transition, the “Regulations” classify and address the management of existing private equity funds that do not meet the requirements by implementing a split between old and new and establishing a transition period.
Hu Lifeng, general manager of the China Galaxy Securities Fund Research Center, told the “Securities Daily” reporter that dividing the old and the new and establishing a transition period is more pragmatic, avoids a one-size-fits-all approach, and gives to market entities a certain amount of time to deal with existing problems, which is helpful. Mitigating potential risks helps maintain the stability of the private equity industry.
“Overall, the ‘Regulations’ will help the private equity industry to clear its roots and effectively lead the private equity industry to optimize the allocation of resources and develop the capital market,” Tian Lihui said. Furthermore, in the current economic context, the introduction of the “Regulations” has implications for financial services in the real economy and the promotion of a market-wide registration system is of great importance. Private equity funds are a major force in market pricing, and promoting a market-wide registration system requires the active participation and standardized operation of private equity funds as a market entity.
Last year, more than 100 private equity institutions collected fines
Strict supervision to promote high-quality development of the industry.
In fact, in recent years, the supervisory authority has significantly increased its crackdown on violations of laws and regulations in the private equity industry. According to incomplete statistics on the website of the Securities Regulatory Commission, the Securities Regulatory Commission and local securities regulatory offices issued administrative sanction decisions on 14 private equity institutions and adopted administrative supervision measures on 104 private equity institutions and 11 private equity professionals. Market prohibition measures were taken. Most of the reasons for the punishment of these private equity institutions are violations of the laws and regulations in the private equity industry mentioned by the relevant person in charge of the CSRC.
For example, in January last year, the Zhejiang Securities Regulatory Office issued an administrative penalty decision on Hangzhou Houde Zaifu Wealth Management Co., Ltd., showing that the company issued Wenying No. 3, Wenying No. 4, Wenying No. 5, Jiaying No. 9, Xinfu No. 1, Xinfu No. 6 and Mofang No. 1 products raised funds from unqualified investors with an investment amount of less than 1 million yuan; In addition, the company embezzled funds from Jiaying No. 9, Xinfu No. 1 and Xinfu No. 6 products, Transfer to related parties or loan to other companies.
The Zhejiang Securities Regulatory Bureau stated that the company violated the Securities Investment Fund Law by raising funds from unqualified investors and embezzling fund properties. Therefore, he confiscated Houdezaifu’s illegal income of 511,100 yuan and punished Houdezaifu. A fine of 400,000 yuan. Ding Mouzhe, who was directly responsible, received a warning and a 100,000 yuan fine.
Insiders believe that with the implementation of the “Regulations”, the private equity industry will usher in further cleanup and rectification. In Zhang Yingbiao’s view, the most important thing is to strengthen the registration and filing obligations of private equity fund managers. “Only through registration and presentation can supervision be based, so that all behaviors that harm investors’ interests have nowhere to hide, avoid legal risks and enhance the credibility of private equity.”
Hu Lifeng believes that due to the characteristics of non-public fundraising, private equity funds have not disclosed information publicly and there is almost no supervision of society, so strengthening supervision is the main means. Over the years of development of private equity funds, the understanding and opinions of all parties about private equity funds have become increasingly consistent. From the beginning, they were focused on development and gave full play to the enthusiasm of the industry. Now they have developed to a certain extent. The inevitable result of years of development in the private equity industry.
“In actual supervision, it is also necessary to distinguish between different types of private equity funds, private equity securities, private equity and venture capital funds. The problems of these three types of private equity funds are quite different,” he said Hu Lifeng.
