Key Points of AMAC’s Recently Released Practice Updates M88 Game Change Process

Since the implementation on May 1, 2023 M88 Game theMeasures for Registration M88 Game Filing of Private Investment Funds(“Measures”), the Asset Management Association of China (AMAC) aims to provide market participants with clearer M88 Game more practical guidance through refining rules M88 Game elaborating regulatory principles. On August 23, 2024, AMAC released theUpdates on the Practice of Private Fund Registration M88 Game Filing(Issuance No. 1 [2024]) (“Practice Updates”) M88 Game theFlowchart M88 Game Explanations on the Information Change Process of Private Fund Managers(Zhong Ji Xie Zi [2024] No.307) (“Change Process”).

Practice Updates: Interpreting the Rules by Case Analysis

On August 11, 2023, AMAC releasedUpdates on the Practice of Private Fund Registration M88 Game Filing(Issuance No. 1 [2023]) (“Practice Updates of 2023”) to registered private fund management institutions for the first time via the Asset Management Business Electronic Registration System (AMBERS), which clarified the rules of the Measures M88 Game some of the common issues faced in practice.

The newly released Practice Updates focus on the registration M88 Game filing requirements of private fund managers. They summarize three key areas that deserve close attention by analyzing some relevant cases.

(i) Zero Tolerance M88 Game Fraud.AMAC has a zero-tolerance attitude towards the submission of false materials. It has taken measures to identify M88 Game eliminate underperforming institutions M88 Game commits to thoroughly examine the authenticity of the materials M88 Game information submitted by private fund managers. This relates particularly to investment management capabilities, the ability to independently operate a business, the ability to operate a business professionally, which AMAC will carefully verify M88 Game cross-check materials through diverse channels.

(ii) Scrutiny M88 Game Risk.AMAC will scrutinize the financial condition M88 Game business operations of the controlling shareholder M88 Game the actual controller of private fund managers, making sure that they are in a healthy financial condition, there is no poor business operation, M88 Game there is no risk spillover due to poor financial conditions or business operations.

In our observation, AMAC typically focuses on the information contained in audit reports, financial statements, bank statements, tax clearance certificates M88 Game other relevant materials (for non-individuals), M88 Game the asset certificates M88 Game the source or disposal of relevant assets (for individuals).

Based on case analysis in the Practice Updates, private fund managers are required to make an overall judgment on the financial conditions M88 Game business operations of their controlling shareholder M88 Game the actual controller, taking the features of industry, main business M88 Game fund flow among affiliates into consideration, through an examination of the proof documents. Private fund managers shall also focus on the examination of on-going capabilities of capital replenishment, prudent operation M88 Game compliance with laws M88 Game regulations of their controlling shareholder M88 Game the actual controller, in order to prevent any potential risk spillover that may cause a significant adverse impact on the operations of private fund managers.

(iii) Emphasis on Capability.AMAC emphasizes that the controlling shareholder, actual controller M88 Game senior management personnel of a private fund manager (the “critical few”) shall possess qualified professional capabilities to ensure compliance M88 Game the on-going operation of private fund managers.

The Measures have put forward requirements on the eligibility of the “critical few”. This includes but is not limited to their experience M88 Game track record in the operation M88 Game management of related industries, their governance structure M88 Game financial condition, their meeting of requirements (e.g., time allocation if holding concurrent positions), the stability M88 Game compliance of the post taking, their qualifications M88 Game other information. We notice that AMAC has already taken the authenticity, comprehensiveness, M88 Game compliance of the “critical few” as a key factor in their final decision making upon review.

The Measures M88 Game their ancillary guidelines specify detailed stM88 Gameards for the requirements of experience, track record, M88 Game stability for post taking. Therefore, the compatibility of proof materials with the related rules should be closely monitored. Using the “experience” requirement as an example, this not only requires the experience to be in a relevant industry or institution, but also within different types of institutions that meet certain criteria, e.g. “having a stable operation M88 Game compliance”, “having had no serious violation of laws or regulations during employment”, “having a good international reputation M88 Game track record”, “having a certain business scale” M88 Game “having certain technology thresholds”.

The Practice Updates provide valuable reference stM88 Gameards in specific cases for determining “prudent operation M88 Game compliance” through the compliance operation, investment scale, financial condition, management scale M88 Game other aspects of an enterprise. These cases enable market participants to better understM88 Game M88 Game assess the eligibility of the concerned parties.

Change Process: Presenting Guidance via a Flowchart

On April 15, 2024, AMAC released theFlowchart of the Registration M88 Game Filing Process of Private Fund Managers(Zhong Ji Xie Zi [2024] No.1009), which provides a comprehensive overview of the process of the initial registration M88 Game filing of private fund managers. It includes establishment with the Administration of Market Regulation authorities, material preparation, account registration, M88 Game the submission of materials M88 Game registration with AMAC. AMAC recently provided another chart M88 Game an ancillary statement to demonstrate the entire information change process for private fund managers.

The Change Process integrates AMAC’s disciplinary rules M88 Game AMBERS’ procedures, covering the requirements for application materials, hM88 Gameling processes M88 Game web links. It also covers key procedures such as registration, filing, correction M88 Game inquiry. AMAC has clarified common issues raised in practice with respect to the change process, including: (i) the difference between the change of major matters M88 Game the information updates of private fund managers; (ii) the time required for the change of information; (iii) the regulatory basis for the change of information; (iv) the connection M88 Game operation sequence between AMBERS M88 Game AMAC’s practitioner management system; M88 Game (v) the different requirements for legal opinions with respect to different types of information changes.

The Change Process also provides contact details for inquiries, queries, complaints M88 Game whistleblowing, enhancing the transparency M88 Game supervision of the entire process. This is convenient for problem-solving M88 Game the rights protection of private fund manager applicants M88 Game other concerned parties.