Focus on regulation of privately offered investment funds

The Interim Measures for the Regulation of Privately Offered Investment Funds were implemented on 21 August 2014. The measures resolve the issues of private fund manager and private fund management rights, and also provide greater detail on the specific regulatory method.

Scope of application

The scope of the territory where private funds governed by the measures can be established is the People’s Republic of China. The measures are silent on whether they cover Hong Kong, Macau and Taiwan, and accordingly the measures should also govern the establishment of private funds in these three regions. The feature particular to private offering is that funds are raised from investors by a “non-public method”, which is the essential difference, as compared to public offering.

Chapter 3 of the measures specifies what “qualified investors” are, and article 14 of chapter 4 further specifies that private funds may not be raised from “non-specific targets”. Accordingly, private funds and their managers may only raise funds from specific targets among the qualified investors specified in the measures, and only in this way is the raising of funds by “non-public method” constituted.