1. Reproduced with permission from World Securities Law Re-
port, 01 WSLR 2016, 01/13/2016. Copyright ஽ 2016 by The
Bureau of National Affairs, Inc. (800-372-1033) http://
www.bna.com
AMAC Issues Self-Disciplinary Rules
For Comments on Private Fund Industry
On December 16, 2015, the Asset Management Asso-
ciation of China (‘‘AMAC’’) issued the Administrative
Measures on the Private Investment Fundraising Activi-
ties (Trial) (Consultation Paper) (‘‘Administrative Mea-
sures’’) for the purpose of soliciting public comments.
The Administrative Measures provide detailed rules in
terms of the definition of fundraising activities, qualifi-
cation requirements for fundraising institutions, gen-
eral principles, specific marketing and promotional ac-
tivities and protection of investors. Once promulgated,
the Administrative Measures will become important
self-disciplinary rules governing the private funds in-
dustry, and their implementation will further the devel-
opment of the China private funds industry in the long
run. Below is an overview of certain key points of the
Administrative Measures.
Qualifications of Fundraising Institutions.
The Administrative Measures define the scope of fund-
raising activities and specify the qualification require-
ments of institutions and individuals engaged in pri-
vate investment fundraising. Fundraising is defined to
include the promotion of funds, distribution of fund
units and handling of fund subscriptions and redemp-
tions.
For fundraising institutions, only two types of institu-
tions are allowed to engage in private fundraising: (1)
private fund managers registered with the AMAC or
(2) institutions that are both registered with the China
Securities Regulatory Commission (‘‘CSRC’’) to carry
on the private fund distribution business and are mem-
bers of the AMAC. This means that when private fund
managers intend to delegate the distribution of private
funds to a third party, they need to examine whether
such third-party distributor is both registered with the
CSRC and is a member of the AMAC. Individuals em-
ployed by fundraising institutions that are engaged in
fundraising must have obtained the requisite qualifica-
tions for carrying on the fund business.
Duties of Fundraising Institutions.
The Administrative Measures specify that fundraising
institutions owe to investors the duties of care, exami-
nation of investor suitability, information disclosure,
confidentiality and preservation of documents (i.e.,
documents shall be maintained for no less than 10
years from the date of liquidation of the relevant
fund). If a private fund manager delegates fund distri-
bution to a third party, it shall enter into a written fund
distribution agreement with the fund distributor and
the fund distributor shall bear the relevant responsi-
bilities according to law and by agreement. Such re-
sponsibilities include (1) completing an ‘‘investor ex-
amination and assessment process,’’ (2) complying
with the relevant marketing and promotion limitations,
(3) providing ‘‘explanations to investors,’’ and (4) com-
pleting a ‘‘qualified investor confirmation process.’’
The above provisions provide ‘‘double protection’’ for
BNA International Inc., a subsidiary of The Bureau of National Affairs, Inc., U.S.A.
VOLUME 2016, NUMBER 1 >>> JANUARY 2016

2. investors. That is, both the private fund managers and
distributors, first, shall assume the above investor-related
legal obligations and responsibilities, and, second, may
allocate and specify their own obligations by signing the
distribution agreements. However, the legal obligations
owed by the private fund managers to investors will not
be discharged by such delegation.
No Split.
In response to the current chaotic phenomena of pri-
vate fundraising, the Administrative Measures explicitly
prohibit splitting and transferring private fund units or
their rights to earnings, which actions covertly elude the
legal requirement that private funds can only be sold to
qualified investors. Such provision specifically responds
to the existing violations in the current market.
Custody of Raised Funds.
The Administrative Measures require private fund man-
agers to open special accounts for private fundraising
and settlement under the names of the private fund
manager as well as either (1) the China Securities De-
pository and Clearing Company Limited or (2) a com-
mercial bank or securities company that is qualified to
engage in the fund distribution business. However, if
one of such commercial banks or securities companies
also concurrently acts as a fund distributor, it may, on its
own behalf, open the special account. Such accounts
aim to safeguard investors’ funds prior to the transfer of
such funds into the relevant fund account or the formal
custodian account.
Limitations on Marketing and Promotion.
The Administrative Measures expressly limit the scope
of public marketing and promotion by fundraising insti-
tutions to brands, development strategies, investment
strategies of private fund managers and information on
funds published by AMAC. Such public materials shall
not contain any marketing or promotion of any specific
fund products. The Administrative Measures also re-
quire, prior to the commencement of any marketing or
promotional activities, the completion of an ‘‘investor
examination and assessment process,’’ and further pro-
vide guidelines on the content and format of the ques-
tionnaires, as well as list prohibited promotional behav-
iors and methods.
Qualified Investor Confirmation Process.
The Administrative Measures detail the requirements
for the investor suitability test and require fundraising
institutions to examine the investors’ suitability by re-
questing and reviewing the financial asset certificates of
the investors. Investors are also protected by provisions
specifying that the cooling period for investors shall be
no less than one day and that, without going through a
confirmation process via a return visit, private fund man-
agers shall not enter into the relevant fund contract.
In terms of risk disclosure, the Administrative Measures
provide guidelines on the content and format of the risk
disclosure letter. The special risks that must be covered
include where (1) the fund contract diverges from the
AMAC’s guidelines on fund contracts, (2) no custodian
is provided for the fund, (3) fundraising is delegated to
a third party and (4) third party investment advisors are
engaged for the fund.
To summarize, the Administrative Measures regulate the
fundraising of private funds in a comprehensive and
concrete manner. Private fund management and distri-
bution institutions shall, therefore, make adjustments in
accordance with the Administrative Measures ahead of
time, and strictly comply with such rules after they are
formally put into place.
Natasha Xie, partner at Jun He Law Offices in Shanghai, can
be contacted at xieq@junhe.com. Lu Bing, associate at Jun He
Law Offices in Shanghai, can be contacted at lub@junhe.com.
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01/16 COPYRIGHT ஽ 2016 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. WSLR ISSN 1357-0889