CHINA Law and Practice Contributed by: Alan Du and Yiwei Shi, King & Wood Mallesons
• periodic reporting obligation (see 2.1.4 Dis- closure Requirements ). 2.3.10 Investor Protection Rules Special Protection for General Investors Qualified Investors that may invest in private funds are broadly split into general investors and professional investors. General investors can be further classified into five types (C1 to C5), based on their risk toler - ances. Special protections will be provided to general investors with respect to information disclosures, risk warnings, suitability matching, etc. For example, fundraisers may not actively conduct marketing of a fund to general investors whose tolerance is lower than the risk level of the fund. Investors who belong to the lowest risk tol - erance category are not allowed to invest in any fund with a risk rating above their risk tolerance. However, investors may invest in relatively riskier funds after accepting special risk warnings that are issued by fundraisers in writing. Fair Treatment to Investors Under the Private Funds Provisions, all investors of a private fund must receive fair treatment. Regulatory Reporting Requirements As well as submitting periodic reports to the AMAC (see 2.1.4 Disclosure Requirements ), private fund managers must also disclose fund operation information to investors, and must submit information disclosure reports to an AMAC online system for records. While private securities investment fund managers should issue an information disclosure report to investors monthly, quarterly and annually, pri - vate equity fund managers are only required to submit semi-annual disclosure reports and an annual disclosure report. As mentioned in 2.1.4 Disclosure Requirements , when certain events
Private fund managers and placement agents must not disseminate information to non-spe - cific targets via public communications media (such as newspapers, radio stations, TV or the internet) or through lectures, seminars, analysis meetings, bulletins, leaflets, short messages, blogs, emails or other means. However, mar - keting through an official website or the internet with a mechanism that is only accessible to spe - cific targets is not considered a public offering. Restrictions on Content of the Presentation Certain content is strictly forbidden to be used when marketing, including: • direct or indirect promises to investors that there will be no losses of the investors’ funds, or that there will be a minimum income; or • using exaggerated words, such as “safe”, “promise”, “secure”, “avoidance of risks”, “guaranteed”, “high income” or “no risk”. 2.3.7 Marketing of Alternative Funds Private funds can only be marketed to Qualified Investors. 2.3.8 Marketing Authorisation/Notification Process Under PRC law, authorisation or notification is not required by the national regulator for market - ing private funds. 2.3.9 Post-Marketing Ongoing Requirements Private fund managers who have marketed and closed a private fund must perform the follow - ing duties: • fund filing with the AMAC (see 2.1.2 Common Process for Setting Up Investment Funds ); • information disclosure (see 2.1.4 Disclosure Requirements ); and
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