Impact on PE funds of new criteria for qualified investors

The Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (the New Rules) were officially issued on 27 April 2018. In addition, on 22 October 2018, the China Securities Regulatory Commission issued two sets of related implementing rules, namely the Administrative Measures for the Private Asset Management Business of Securities and Futures Firms (the Measures) and the Administrative Provisions for the Operation of the Private Asset Management Plans of Securities and Futures Firms (the Provisions). These two sets are collectively referred to as the Asset-Management Rules.

The New Rules and the Provisions set forth new criteria to determine what makes a qualified investor different from qualified investors in the currently implemented Interim Measures for the Regulation of Private Investment Funds (the Interim Measures). Accordingly, the writer of this column have teased out and compared the differences in the provisions on qualified investors in the aforementioned documents, as well as analyzing the issue of the application from hereon in of the criteria for qualified investors of private funds.

The criteria for qualified investors that private funds currently rely on, carried in Article 12 of the Interim Measures, state that “the term ‘qualified investor of a private fund’ means an entity or individual that has the attendant capacity to identify and bear risks, invests not less than RMB1 million in a single private fund and satisfies the following relevant criterion: (1) an entity with net assets of not less than RMB10 million; or (2) an individual with financial assets of not less than RMB3 million or whose average annual income, during the most recent three years, is not less than RMB500,000”.

Wang Bin is a partner and Shi Yutian is a legal assistant at Boss & Young