The Regulations on the Supervision and Administration of Private Investment Funds took effect on 1 September 2023. The first administrative regulation in the private fund sector, it contains seven chapters and sixty-two articles, elevating requirements previously found in departmental rules and self-regulatory codes.
For managers, one belief needs correction: registration and filing are not regulatory endorsement. The regulations state expressly that manager registration and fund filing do not constitute approval of the manager’s capability, the fund’s compliance or its investment value. Marketing that treats “filed” as proof of credibility is inconsistent with the regulator’s position and may mislead.
Managers and their duties
Managers must have qualified personnel, premises, internal governance and risk management, and register with the Asset Management Association of China. They owe duties of loyalty and diligence, must protect investor interests and may not use fund assets or their position to obtain improper benefits.
Fiduciary duty is not abstract. It appears in concrete conduct: whether related-party transactions are fair, follow decision procedures and are disclosed; whether investment decisions are reasoned; whether fees comply with the contract; whether risks are handled and communicated promptly.
Fundraising and qualified investors
The regulations retain the qualified investor regime. Distributors must fully explain the fund, its risk profile and fee structure, may not raise funds from non-qualified investors, may not make false claims or promise principal and returns, and may not split fund units to circumvent investor thresholds.
Documentation matters in distribution. Suitability matching, risk disclosure, cooling-off arrangements and follow-up records are key evidence of performance. A signed contract alone often does not prove a compliant fundraising process.
Investment operations and related-party transactions
The regulations require investing according to the contract, prohibit misappropriation of fund assets and prohibit activities that evade supervision. Related-party transactions require decision procedures and disclosure to prevent transfer of benefits.
Group-affiliated managers need particular care: asset transfers, service procurement and channel arrangements with affiliates may all be treated as related-party transactions. Procedurally, investor representatives or independent decision mechanisms should participate; substantively, the fairness of pricing should be demonstrated.
Risk handling and liability
The regulations strengthen supervisory measures and liability, with penalties for non-compliant fundraising, misappropriation and failure to file. Compliance costs rise, but the rules also become more certain.
For investors, the regulations provide clearer routes to accountability, though they do not make managers insurers of investment risk. Risk allocation, exit arrangements and disclosure in the fund contract remain the first line of protection.
Four checks for managers
First, whether registration information matches reality and personnel, premises and systems continue to meet requirements. Second, whether fundraising is documented and qualified investor files are complete. Third, whether related-party transactions have decision and disclosure records. Fourth, whether fund contracts, risk disclosures and marketing materials contain guarantees or misleading statements.
For private funds and equity financing, see our financing and equity service; for fund contracts and related-party arrangements, see commercial contracts; for investor disputes, see commercial disputes.
This article is based on the Regulations on the Supervision and Administration of Private Investment Funds in force from 1 September 2023. It is for reference only and does not constitute legal advice.