Concerns erupt over new China registration regime

GPs are expressing worry over the AMAC’s ability to safely secure their data.

China’s Asset Management Association of China (AMAC), a self-regulatory organization authorized by the nation’s securities regulator the China Securities Regulatory Commission (CSRC) to regulate investment funds and managers, is facing inquiries over certain aspects of its new registration regime.

On February 7, private fund advisors based in China were required to register, and enter into a reporting relationship with the AMAC providing the fund’s investment focus, legal name, size, investors, fund agreement and similar information. GPs must also make quarterly and annual filings with the regulator providing updated information.

Since then, “questions have been raised as how to ensure confidentiality and whether less frequent reporting would be more appropriate,” said Xuan Zhang, a counsel in O’Melveny & Myers Beijing office.

Multiple lawyers speaking to pfm said they are fielding calls from their GP clients who expressed similar concerns about the registration process but are hesitant to speak publicly about it in fear of being potentially targeted by the new regulator.

One of the industry’s concerns is that information submitted to the AMAC, including sensitive portfolio company data, will be available for public consumption. However legal advisors are assuaging these concerns by noting only basic fund information, like fund size and investment focus, will be disclosed to the public on AMAC’s website.

Zhang also questioned how the AMAC plans to digest the sheer amount of information sent its way from China’s blooming funds industry. Domestic private fund managers and funds, regardless of size, are required to register with AMAC.

Nonetheless Zhang described the AMAC and the CSRC as “more user-friendly” than the National Development and Reform Commission (NDRC), where GPs registered previously.

The CSRC took over from the NDRC to become the sole private equity regulator last year but has yet to issue long-awaited private fund implementation rules. Further market confusion on registration in China stems from the NDRC ignoring applications from private funds for authorization since last August as power was being handed over to the AMAC, according to market sources.

Zhang said the CSRC’s rules may be issued later this year but stressed there was no clear timetable for their release. “We understand [the CSRC rules] are under review by the State Council and will apply to all private funds, including privately-raised securities investment funds, private equity, venture capital funds and others.”