Private equity fund development and security balance wealth | Fund | Security
On July 9th, the Regulations on the Supervision and Administration of Private Investment Funds were announced and will come into effect on September 1st of this year. This is the first administrative regulation in China's private equity investment fund industry, marking the further legalization and standardization of industry development.
With the continuous increase in income, the demand for wealth management among Chinese residents has shown explosive growth, and the private equity fund industry has also entered a fast lane of development. As of May this year, there were 22000 private fund managers registered with the China Securities Investment Fund Industry Association, with 153000 registered private funds and a fund size of around 21 trillion yuan, ranking among the top in the world.
Private equity funds play a positive role in serving the real economy, supporting entrepreneurship and innovation, and increasing the proportion of direct financing. Especially as an important direct financing channel and capital formation tool, private equity funds have become an important "incubator" and "booster" for small and medium-sized enterprises, high-tech enterprises, start-ups, and specialized and innovative enterprises.
Undoubtedly, the private equity fund industry has also experienced a phenomenon of "not washing the mud when the carrot is fast" in its development process. Some engage in illegal financial activities such as fundraising under the name of "private equity funds"; Some sell private equity fund products to investors who lack the ability to identify and bear risks, misleading or even deceiving investors; Some operations are not standardized, and there are behaviors that seriously damage the legitimate rights and interests of investors, such as interest transmission, false investment, and misappropriation of fund assets. These chaos seriously affect financial security and social stability.
To promote development and prevent risks, the Regulations have emerged, changing the long-standing situation of insufficient supply of laws and administrative regulations for private equity funds. The Regulations clearly include private equity funds in the scope of regulation, consolidating the upper legal foundation for the supervision of private equity funds, and also indicating that strengthening industry supervision has achieved social consensus.
The Central Committee of the Communist Party of China and the State Council attach great importance to the functional role of the private equity fund industry, and also attach great importance to industry risk prevention and control. They have repeatedly put forward relevant requirements for increasing the cost of illegal activities in the capital market.
This regulation aims to coordinate development and safety, combining standardized regulation with respect for market laws, and clearly proposes that the state encourages the healthy and standardized development of the private equity fund industry. At the same time, in accordance with the principles of functional and moderate supervision, we will improve the regulatory standards for various private equity fund products, set regulatory bottom lines, address prominent industry issues, seize key entities and links, and strengthen risk source control. It not only standardizes the development of the industry, firmly holds the bottom line of avoiding systemic risks, but also leaves enough freedom and development space for the industry. Based on the characteristics of private equity funds, regulatory resources are reasonably allocated to help the industry develop steadily and further.
The equal emphasis on development and security is reflected in strengthening source management. In response to the emphasis on professional competence and integrity in private fund investment management, which is not something that can be done by the general public and cannot be generalized, the Regulations strengthen the supervision of private fund managers and custodians, clarify negative lists, continuous regulatory requirements, etc., in order to strengthen source management, strictly control incremental risks, and create a standardized and orderly competitive environment for the development of the private fund industry.
The equal emphasis on development and security is reflected in the differentiated supervision of venture capital funds. Venture capital funds are the "accelerator" for the transformation of technological achievements and the innovation and development of enterprises. The Regulations have set up a special chapter to make differentiated regulatory arrangements for them, which are different from other private equity funds. They provide convenience for venture capital funds mainly engaged in long-term investment, value investment, and the transformation of major technological achievements in terms of investment exit, and encourage, support, and guide them to "invest early, invest small, and invest in technology".
The equal emphasis on development and security is also reflected in exempting a layer of nested restrictions on reasonable business development needs such as the parent fund. This helps the industry to introduce long-term funds, better play its role in promoting direct financing and supporting technological innovation.
Good law and good governance are the cornerstone of the standardized and healthy development of the private equity fund industry. I believe that with the escort of the Regulations, China's private equity fund industry will shift gears and upgrade to achieve high-quality development.
