14 Trillion Private Placement Filing Regulation Further Upgrade: Non-Standard Lending, First And Then Raise The Chaos Will Be Closed.

The overall regulation of the private placement market is moving towards a new stage.

In December 23rd, the China Securities Investment Fund Industry Association (hereinafter referred to as the China Association for basic research) issued a long-awaited version of the new version of the private placement fund Record Guide (2019 Edition).

From the "notes", the future does not belong to private fund business scope, engaged in or disguised in credit, private lending and other non-standard financing products (hereinafter referred to as non-standard private placement) record will be significantly restricted, according to "new and old delimit" regulations, the new deal will be implemented in April 1st next year.

In the industry view, the landing of "notice" will strengthen the supervision of the private sector in the product registration section, and further urge the industry to bid farewell to the "category based real loan" and other lending businesses that do not belong to the fund business category, and guide the private sector to return to the main source of the fund.

Blocking financing activities

Although the record keeping instructions (2018 Edition) have already restricted the fake private placement activities such as "name based and real loan", some private funds still have old problems that can not be comprehensively and effectively solved in the collection, investment and management links.

"First, there are still private equity funds in the form of rigid repurchase, differential compensation and other forms in disguise" pseudo private placement "activities; the two is to use the association's record as private equity fund's compliance endorsement, first, then raise, prepare less and raise more phenomenon still exists and has a general trend; three, through related party transactions, the problem of interest transmission is prominent. Some new situations, new forms and new risks also emerge at the same time.

"P2P and other cross industry financial risks are being transmitted and squeezed to private equity funds, facing a huge spillover risk exposure; the private-sector channel phenomenon is aggravating; private fund" old shell new use "and so on to avoid regulatory requirements occur frequently. According to the above, the release of the new regulation on information management in April last year also raised the requirements for further refinement and perfection of the filing supervision work.

"In recent years, a series of private fund-raising cases such as Fuxing and avant-garde," private equity products "has become a financing tool used by private fund-raising activities, which has brought a certain degree of confusion to the financial market order. Liu Peng, who is the head of a private equity institution in Beijing, believes that it is necessary to introduce a new deal to further clarify the fake private placement products with the nature of borrowing and financing activities.

From the "notes", regulators will still be reflected in loans, non-standard one category of "pseudo private products" plugging in an important position.

For example, in the way of a similar negative list, for example, the filing of the notice puts forward five "investment activities" which are not in line with the nature of the fund, such as "engaging in lending business or investment credit assets in disguise", "engaging in regular and operating private lending activities such as entrusted loans and trust loans", and "engaging in loan activities in disguised form".

Not only does the definition limit, but the notes also follow up many detailed policies. For example, for some arbitrage activities that are hidden in the private equity of private equity, the notice puts forward the requirement that the two types of private equity products of equity class and asset allocation should be retained for a period of not less than 5 years.

Many "fake real debt" projects because the underlying assets are loan items, so the return period is usually about 1-2 years, but real equity investment products tend to have long-term investment characteristics, and more than 5 years of survival arrangement helps to further screen out products that are really equity investments. A head of a PE agency close to the regulatory authorities in Shanghai said, "of course, for the organization, the 5 year survival period is flexible. If the project expires, it can be liquidated in advance."

"On the whole, it is still restricting private equity funds to engage in lending business, and let them return to the source of fund investment." Liu Peng said.

Restriction on "preparation before collection"

While blocking the record of "false private placement", more chaos related to the private sector has been further reviewed.

For example, "notice" put forward a trust requirement for some special fund models, including private placement funds, asset allocation private placement funds, and private investment funds which are indirectly invested through two kinds of special purpose vehicles, such as company and partnership, which need to be trusteeship by trustees with the qualification of trusteeship.

"If it is a corporate or partnership fund, it has the right to do business at its own level, and there are shareholders' meetings and other governance structures to regulate investment operations." The above PE agency official said, "but contract type, asset allocation class and nested products may have black box problem in the investment operation process, so we must strengthen investor protection through trusteeship and man-machine system."

In terms of investor appropriateness management, the notice also stresses that investors who need to invest in private equity funds such as partnerships and other non legal entities need to go through the bottom to examine whether investors are appropriate or irregularities.

"Some private institutions in order to facilitate the raise in disguised form to reduce the threshold of investors, and then through the sale of partnership funds to share" big dismantling small ", resulting in some investors with lower funds to participate in private equity products investment situation. A private person close to the regulatory level in Beijing said, "through inspection means that the suitability of such investors will be examined."

It is worth mentioning that the notice also adopted corresponding measures against the phenomenon of "preparation for first raise" after the record of private placement was raised, that is to say, the two types of private placement of private equity and asset allocation should be closed down after completion, and no longer be allowed to open and reclaim in a disguised way.

"According to the requirements of the fund law, private placement is subordinate to the scope of self-regulation, so it should be raised and filed again. However, some private equity products will be put on record for millions of dollars, and then large-scale collection will be made after the completion of the record." The above private placement said, "this behavior has taken the association record as" endorsement "to raise the question, many investors do not understand the private product self-regulation filing mode, and thus lead to its investment decision interference.

However, the new regulation also reserved certain institutional space for private equity funds that meet certain conditions after filing the record. For example, if the private placement fund is in the contractual investment period, the company / partnership or the custodian mechanism has been arranged, and the subscription amount that does not exceed 3 times the principal amount paid for the record will be added later.

"Some equity funds do exist when the LP needs to wait for the completion of the record to enter. In order to reserve a certain space for the system, that is, on the basis of satisfying the corresponding conditions, the maximum 3 times of the subscription amount can be increased later. That is to say, the sum of 100 million yuan will be increased, and the amount of 300 million yuan will be increased later. The above official said frankly, "this regulation effectively limits the chaos after the first preparation, but at the same time, it also protects the development of some private equity funds in space."

"The private equity fund is not" prepared for the record ". The manager must continue to fulfill the obligation to submit the private investment fund operation information to the association, and take the initiative to accept the self regulatory management of the association and the private equity investment fund. The association will continue to monitor the investment and operation of the private investment fund. The association said.