New Provisions on Information Disclosure and Reporting of Private Investment Funds
On July 5, 2024, CSRC issued a consultation draft of the Administrative Provisions for Information Disclosure and Information Reporting of Private Investment Funds (《私募投资基金信息披露和信息报送管理规定(征求意见稿)》, the full text can be accessed at: http://www.csrc.gov.cn/csrc/c101981/c7491809/content.shtml) (the "Draft Provisions") to seek public comments. According to CSRC in its explanatory notes, the Draft Provisions are intended to further implement the requirements under the Regulation on Supervision and Administration of Private Investment Funds (《私募投资基金监督管理条例》) issued by the State Council on July 9, 2023. The consultation period will end on August 5, 2024.
Prior to the Draft Provisions, the information disclosure of private funds is mainly based on the Administrative Measures of Information Disclosure of Private Investment Funds (《私募投资基金信息披露管理办法》) issued by AMAC ("AMAC Measures").
We have set out below the key noteworthy aspects of the Draft Provisions for your reference:
I. Information Disclosure Obligators
The Draft Provisions specify that the private fund managers, custodians, and service providers are the obligators to make information disclosure to investors of private funds. The private fund managers shall not be exempted from the disclosure obligations due to delegating information disclosure to distributors or other service providers, or through any contractual arrangements.
II. Information Disclosure Channels
According to the Draft Provisions, the private fund managers shall use non-public methods such as mail, websites, mobile applications, email, SMS, and other means to disclose information to investors.
III. Confidentiality Requirements
Unless otherwise provided, the information disclosure obligators shall not disclose private fund-related information to other institutions and individuals except the qualified investors. The Draft Provisions also state that information disclosure obligators, investors, and relevant regulators must maintain the confidentiality of private fund information, business secrets, personal privacy, etc., which is also consistent with the AMAC Measures.
IV. Key updates/changes to information disclosure of private funds
The Draft Provisions outline specific requirements on information disclosure for private securities investment funds and private equity investment funds, including several key aspects:
(i) Disclosure timelines. Compared to the AMAC Measures, the Draft Provisions revise the relevant timelines for information disclosure. For instance, the deadline for monthly reports of private securities funds has been extended from 5 business days to 10 business days after each month-end.
(ii) New disclosure requirements. Additional disclosure obligations are introduced for both regular and ad hoc reporting. For example, private fund managers must disclose cross-border investments and capital flows in quarterly reports. The Draft Provisions also mandate disclosure of underlying investments/assets by private securities funds and private equity funds. Specifically speaking,
- For private securities investment funds, the private fund managers are required to disclose underlying holding positions and investment processes as well as the status of underlying assets with low liquidity. However, if the underlying assets involve non-public information, the private fund managers may alternatively fulfil the disclosure obligation by providing information such as the strategy type, investment portfolio, position concentration, leverage ratio, and valuation methods of the underlying assets; if the underlying involves derivative investments, the linked underlying asset categories and other information should be disclosed. Please note that there is no clarification yet on what constitutes “non-public information” but seemingly AMAC allows the PFMs to use more generalised information rather than specific holding information to meet their disclosure obligations.
- For private equity investment funds, if a private equity investment fund invests in other private funds or asset management products, or invests through special purpose vehicles, it should disclose in its periodic fund reports the top ten underlying investment targets by investment amount, including the investment process, investment amount, shareholding ratio, and ownership confirmation.
Furthermore, the private fund managers are also encouraged to disclose additional information to assist investors in making informed investment decisions.
(iii) Audited annual financial statements. Specific circumstances are detailed in the Draft Provisions where audited annual financial statements and/or the involvement of a qualified accounting firm are mandatory.
V. Impact on Funds Contract
According to the Draft Provisions, the funds contract must include the following provisions:
(i) Mechanism for non-performance and major risks: The contract should outline a mechanism to address situations where private fund managers are unable to fulfil their information disclosure obligations or when significant risks emerge.
(ii) Disclosure of underlying assets: In cases where a private fund invests in other private funds or asset management products (excluding retail funds), the contract should stipulate arrangements for disclosing relevant information about underlying assets on a look-through basis.
VI. Impact on Internal Control of Private Fund Managers
(i) Internal policies. The private fund managers must maintain an information disclosure and information reporting management policy (which may need to be updated in accordance with the Draft Provisions), strengthen the control of non-public fund information, and establish a registration system for individuals aware of sensitive information.
(ii) Dedicated Personnel. The private fund managers shall designate specific departments and senior management personnel to be responsible for information disclosure and information reporting matters.
(iii) Data Retention Obligation. Private fund managers are required to retain information disclosure and reporting documents and materials for a minimum period of 20 years. This duration represents an increase from the 10 years stipulated in the AMAC Measures.
VII. Impact on Shareholders and Actual Controllers
The shareholders and actual controllers of the private fund managers are required to collaborate with the private fund managers in fulfilling information disclosure and information reporting obligations. They must refrain from organising, instigating, or assisting private fund managers in violating relevant provisions on information disclosure and reporting. Failure to comply may result in administrative measures being taken by regulators against the shareholders and/or actual controllers.
VIII. Grandfathering Mechanism
The Draft Provisions do not provide a specific grandfathering mechanism. As a result, it remains uncertain whether existing private funds will be required to comply with the new requirements outlined in the Draft Provisions.
Should you have any questions or require further assistance regarding the Draft Provisions, please do not hesitate to contact us.
联系人:
司瑶瑶
合伙人，上海
电话：+86 21 8013 5158
杨帆
联席负责人，上海/北京
电话：+86 21 8013 5022
