Professional Interpretation

Abstract: On September 30, 2018, in order to further supervise and standardize the private equity fund managers to fulfill the information disclosure obligations of private equity funds on time and protect the legitimate rights and interests of investors, the Association issued the Notice on Strengthening the Relevant Matters Concerning the Self-discipline Management of Information Disclosure of Private Equity Funds (Hereinafter referred to as the "Notice"). The requirements for private fund information disclosure are clarified. This article will analyze the impact of the information disclosure time node during the operation of the private equity fund, the risk disclosure system during the private fund raising period and the failure to disclose according to the requirements to the private equity fund manager.

1. The notice clarifies that the relevant requirements for private fund information disclosure are as follows:

1. From the date of the issuance of the Notice, whereas the private equity fund manager has not backed up the private equity investment fund in the third quarter of 2018 and the subsequent quarterly and annual reports, private equity (including venture capital) investment funds in 2018 and in the future, the semi-annual report and annual report and other information disclosure reports is not listed twice, the Association will list it in the list of abnormal institutions and publicize it through the private fund management publicity platform (http://gs.amac.org.cn).

Note: Once the private fund manager is publicized as an abnormal institution, even if the rectification is completed, the normal organization publicity status will be restored after at least 6 months.

2. From November 1, 2018, if the registered private equity fund manager fails to fulfill the above-mentioned private fund information disclosure backup obligations as required, the Association will suspend the application of the private equity fund product filing application of the institution in the private equity fund manager to complete the corresponding before the rectification request.

2. Therefore, the Notice emphasized the impact of the regular disclosure requirements of private fund managers and the failure to fulfill their disclosure obligations in a timely manner once again, which shows that the Association attaches importance to the information disclosure system. Specifically embodied in:

1. Requirements for private fund information disclosure time nodes;

2. Requirements for the risk disclosure requirements during the private fund raising period;

At present, the special risk disclosure includes: the risk involved in the inconsistency between the fund contract and the association contract; the risk of the private fund untrusted; the risk involved in the private fund's entrustment; the risk involved in the private fund outsourcing; the risk involved in the private fund's investment adviser; the private equity fund did not carry out the risks involved in the filing formalities of the association;

General risk disclosure includes: risk of financial loss; risk of fund operation; liquidity risk; risk of failure to raise; risk of investment target; tax risk;

In addition, it should also focus on the disclosure of the special risks involved in the liquidity of private equity funds, related transactions, single investment targets, product structure, and underlying targets.

After refinement and supplementation, a relatively complete private fund risk disclosure system has been formed.

If the private fund manager fails to fulfill the obligation of periodic disclosure and disclosure of major matters, the investor may complain or report to the association. The association may require it to make corrections within a time limit. If the private fund manager fails to make corrections within the time limit, the association may regard the circumstances as Private fund managers and principals take disciplinary actions such as reminders, written warnings, requests for compulsory training, industry condemnation, blacklisting, etc.

In addition, private fund managers may face the possibility that the association will suspend the application for filing of private equity products of the institution. If the private fund manager fails to fulfill the quarterly, annual and major event information reporting update obligations up to 2 times, the China Fund Industry Association will list it in the list of abnormal institutions and publicize it through the public fund manager's publicity platform. Once the private fund manager is publicized as an abnormal institution, even if the rectification is completed, the normal organization publicity status will be resumed at least 6 months later.