China unveils domestic fund registration

Funds will register and report to a new regulatory body.

Fund managers raising RMB vehicles in China will need to register with and report to a new organisation, the Asset Management Association of China (AMAC), which is authorized by China’s securities regulator, the China Securities Regulatory Commission (CSRC), according to a client note from Debevoise & Plimpton.

The requirement, which was first reported in sister publication Private Equity Manager, will go into effect on February 7, 2014.

In the past, domestic funds had to register with the National Development and Reform Commission (NDRC), which would comment on whether the terms of the fund agreement were appropriate, says Andrew Ostrognai, partner and chair of Debevoise & Plimpton’s private equity practice in Asia.

“The new registration is more of a filing of basic information, without delving into fund terms.”

Registration with AMAC applies to all fund sponsors, foreign and domestic, who are setting up a manager in China to raise and manage an RMB fund vehicle in the form of a Chinese limited partnership, according to Debevoise.

During registration, basic fund manager information such as names of senior management  is required, says Serena Kuang Tan, associate at Debevoise in Hong Kong. 

Fund information will be more extensive and includes, for example, the limited partnership agreement and the number of investors. After registration, managers will make quarterly and annual reports as well as submit audited financials each April, Tan adds.

AMAC will disclose basic fund information to the public on its website.  

“Some information will be made public such as target size of the fund, but it is too early to have a sense of whether or how much non-public information will be disclosed to anyone upon request,” Tan says. 

AMAC will have the authority to make on-site inspections, suspend filing status for securities violators and maintain a public record of misconduct.

Ostrognai adds that the AMAC is a quasi-governmental body and its relationship to the CSRC is roughly analogous to the relationship between the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) in the US.