According to the statistical data released by the Asset Management Association of China (hereinafter referred to as "AMAC"), as of the end of February 2021, there were a total of 24,623 private fund managers nationwide, an increase of 36 from the previous month, with a month-on-month growth rate of 0.15%. Among them:

• Private Equity and Venture Capital Fund Managers: 15,028, an increase of 20 from the previous month, with a month-on-month growth rate of 0.13%
• Private Securities Investment Fund Managers: 8,934, an increase of 18 from the previous month, with a month-on-month growth rate of 0.20%
• Private Asset Allocation Fund Managers: 9, unchanged from the previous month
• Other Private Investment Fund Managers: 652, a decrease of 2 from the previous month, with a month-on-month decline of 0.31%

It can be seen from the above data that the registration of private fund managers is showing a trend of slow overall growth. The main reason for this is that AMAC has adopted more stringent standards for the review and approval of fund manager registrations. In particular, in February 2020, AMAC issued the differentiated List of Application Materials for Private Fund Manager Registration, which applies to securities-related and non-securities-related managers respectively, making the application requirements for fund managers more detailed and specific. For all companies applying for a new fund manager license, the association also conducts reviews from two aspects: formal satisfaction of materials and substantive completeness. Although the review criteria are clearer, it is undeniable that the standards have become more stringent.

Based on the research on the relevant rules of AMAC regarding manager registration and combined with practical experience in handling manager registration, the author briefly analyzes the key issues that need to be focused on during the application process for private fund manager registration for reference:

I. Name and Business Scope of the Applicant Institution

The China Securities Regulatory Commission (CSRC) issued the Several Provisions on Strengthening the Supervision of Private Investment Funds (No.71 [2020]) on December 30, 2020, which stipulates that:

A private fund manager shall indicate the words " Private Fund", " Private Fund Management", or " Venture Capital" in its name, and indicate words reflecting the characteristics of entrusted management of private funds such as " Private Investment Fund Management", " Private Securities Investment Fund Management", " Private Equity Investment Fund Management", or " Venture Capital Fund Management" in its business scope.

According to statistics on registered private fund managers, most of them do not indicate the words "Private Fund" or "Private Fund Management" in their names, but instead frequently use words such as "Investment Management", "Asset Management", or "Industrial Investment". For managers who have already completed registration, they are not required to rectify their names (unless there is a change in the actual controller of the manager) due to the " grandfathering principle (new and old distinction)" adopted in the above rules. However, for proposed newly-established managers, attention should be paid to whether their company names and business scopes meet the requirements of the above rules. If not, it is necessary to communicate in advance with the local enterprise registration authorities, financial office and other competent departments to complete the corresponding changes to the name or business scope before applying to AMAC for manager filing and registration.

II. Capital Contribution Capacity of Shareholders

At present, the relevant regulations of the CSRC and AMAC do not specify a specific amount for the registered capital of managers, but require that the contributors (shareholders) of the applicant institution shall make contributions in the form of monetary assets, and at the same time require the contributors (shareholders) to have capital contribution capacity matching the amount of their subscribed capital, and provide corresponding supporting documents.

By sorting out the feedback questions from the association, it is found that for the capital contribution capacity of shareholders, the applicant institution can provide the following materials to prove it according to the different nature of shareholders:

1. Natural Person Shareholders

• Salary: Salary income certificate, bank flow, or personal income tax payment voucher
• Investment Income: Account statements, transaction detail records
• Financial Products: Financial product contracts and corresponding payment certificates
• Real Estate: House purchase contract, invoice, house ownership certificate
• Vehicles: Vehicle license, vehicle purchase invoice
• Corporate Equity: Investment contracts, corporate audit reports or financial statements, equity certificates, etc.

2. Legal Person Shareholders

• Can provide the enterprise's previous year's, semi-annual, or quarterly financial statements, audit reports, tax payment vouchers, etc.

III. Related Party Verification

In accordance with the requirements of the Guidelines for the Registration of Private Fund Managers (Updated December 2018) (hereinafter referred to as the "Registration Guidelines"), when applying for manager registration, the applicant institution shall disclose information about its related parties in a comprehensive, accurate and complete manner, and explain whether there are related transactions, horizontal competition, etc. between them and the applicant institution.

By reviewing the content of the Registration Guidelines, it is found that AMAC's definition and identification of "related parties" are quite different from those in our daily equity projects. The related parties identified by AMAC mainly include the following categories:

1. Subsidiaries of the Applicant Institution: Refers to financial institutions, listed companies with a shareholding ratio of more than 5%, and other enterprises with a shareholding ratio of more than 20%
2. Branches
3. Other Related Parties: Refers to financial institutions, private fund managers, investment-type enterprises, enterprises with conflicting businesses, investment consulting and financial service enterprises, etc. controlled by the same controlling shareholder/actual controller

The above-mentioned enterprises with conflicting businesses mainly refer to enterprises engaged in businesses that conflict with private fund business, such as private lending, private financing, financial leasing, margin trading, small-sum wealth management, small-sum lending, P2P/P2B, crowdfunding, factoring, guarantee, real estate development, trading platforms, etc.

As one of the key verification items of AMAC, related parties mainly focus on whether the applicant institution's disclosure of related parties is comprehensive and complete, whether there are undisclosed related parties, the main business of related parties and whether there are significant business transactions or interest transmission between them and the applicant institution. Therefore, when applying for private fund manager registration, the applicant institution shall ensure that the disclosure of related parties is true, accurate and complete. At the same time, lawyers need to explain the basic information and main business of each related party in the legal opinion. If there are institutions engaged in private fund business among the related parties, it is necessary to verify whether they have been registered and filed with AMAC; if not, further explanations are required. In addition, all related parties are required to issue a letter of commitment stating that there is no insider trading or interest transmission with the applicant institution.

IV. Senior Management Personnel and Their Competency