CHINA Law and Practice Contributed by: Alan Du and Yiwei Shi, King & Wood Mallesons
2.3.2 Requirements for Non-Local Service Providers Generally, only local service providers are allowed to provide services in China to private funds. For non-local service providers providing ser - vices outside China to Chinese private funds/ fund managers, PRC law is silent regarding the regulation of registration requirements, etc. Con - sidering a Chinese fund is unlikely to have an offshore account or other offshore operations, it seems unlikely that a Chinese fund would engage a non-local custodian or administrator. 2.3.3 Local Regulatory Requirements for Non- Local Managers Only fund managers that have been duly regis - tered with the AMAC are permitted to manage private funds in China. No regulatory require - ments are expressly applicable to non-local managers of private funds. A non-local man - ager’s marketing activities in China for their off - shore funds are not clearly dealt with by PRC law, and professional advice should be sought before conducting such activities. 2.3.4 Regulatory Approval Process See 2.1.2 Common Process for Setting Up Investment Funds . 2.3.5 Rules Concerning Pre-Marketing of Alternative Funds There is no clear definition of pre-marketing under PRC law. With reference to the EU’s defini - tion, pre-marketing activities may be understood as including provision of information on invest - ment strategies or investment ideas on behalf of a private fund manager to qualified investors, and testing investors’ interest in a private fund before the commencement of fundraising, but without providing such information as contained
in the fund marketing documents (see 2.1.4 Dis- closure Requirements ). For the provision of information on investment strategies or investment ideas, the Measures for the Administration of the Fundraising of Private Investment Funds (the “Fundraising Measures”) expressly allow private fund managers to mar - ket their investment strategies through legitimate and public means, indicating a relaxed attitude towards regulating such activities. PRC law is silent on the testing of investors’ interest in a private fund, but before such testing it is advisable to complete the following: • determination of specified investors; and • suitability matching (see 2.3.10 Investor Pro- tection Rules ). 2.3.6 Rules Concerning Marketing of Alternative Funds In general, the marketing of private funds is regulated by: • the Securities Investment Fund Law; • the Fundraising Measures; • the Measures for the Administration of the Appropriateness of Securities and Futures Investors promulgated by the CSRC (the “Appropriateness Measures”); and • the Private Funds Provisions. Public Offering Should Be Avoided During Private Fund Marketing In the PRC, approval is required for marketing to the general public. According to the Secu - rities Investment Fund Law, raising funds from non-specific targets or issuing securities to more than 200 specific targets accumulatively in the PRC will be regarded as a public offering and should be subject to the CSRC’s approval.
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