Against the backdrop of increasingly strict financial regulation, since 2017, the China Securities Investment Fund Industry Association (hereinafter referred to as the "Fund Industry Association") has gradually strengthened its pre audit and in-process and post supervision of fund managers. It has successively issued the "Answers to Issues Related to Private Fund Registration and Filing (14)", the "Decision of the China Securities Investment Fund Industry Association on Further Strengthening Self discipline Management of the Private Fund Industry", the strictest shareholder contribution standards, the "Solemn Declaration", and the "Notice on Registration of Private Fund Managers (updated in December 2018)".

The "Notice on Registration of Private Fund Managers (Updated in December 2018)" (hereinafter referred to as the "New Filing Notice") has put forward many new requirements and conditions for the filing of fund managers, representing a new attitude of the Fund Industry Association towards the filing of fund managers. The above new filing notice has been called the "strictest filing notice in history" by many insiders.

The author has reviewed and analyzed the new version of the filing instructions, and found that compared with the original filing requirements, the main additions or modifications in this filing notice are as follows:

1、 More explicit emphasis on the independence of the office space of the applying institution

The new version of the filing notice clearly requires that the office premises of the applying institution should have independence. If the place of business registration and the actual place of operation of the applying institution are not in the same administrative region, the rationality of the separation should be fully explained. The applying institution shall truthfully fill in relevant matters, and the law firm shall conduct relevant factual due diligence, explaining the location of the applying institution's business and registration respectively, and whether it is indeed operating in the actual business location.

2、 Put forward stricter requirements for the financial system and funding situation of the applying institution

The new version of the filing notice clearly requires that, according to the "Internal Control Guidelines for Private Investment Fund Managers", the applying institution should establish and improve its financial system. When applying for private equity registration, there should be no outstanding debts due, high asset liability ratios, or large contingent liabilities that may affect the normal operation of the institution. If the applying institution has financial transactions with related parties, it should ensure that the financial transactions are genuine and reasonable.

The above content is one of the newly added contents of this filing notice, which includes a sound financial system and the debt situation of the applying institution as one of the requirements for filing review. This means that during the filing registration review, the Fund Industry Association will conduct a review of the financial norms of the applying institution, in addition to the capital contribution, which also increases the difficulty of issuing legal opinions from law firms to a certain extent.

3、 Expanded the scope of application of non compete agreements

The new version of the filing notice clearly requires that practitioners and investors of private fund managers should abide by the principle of non competition, fulfill their duties diligently, and should not engage in activities that may conflict with the interests of private equity business at the same time.

Compared with the previous review requirements, this filing notice has expanded the scope of non compete application from employees of the applying institution to its investors, which has also increased the difficulty and complexity of filing for fund managers to a certain extent.

4、 Higher requirements have been put forward for the issue of executive part-time jobs

The new version of the filing notice clearly requires that senior executives of private fund managers shall not hold part-time positions in non affiliated private equity institutions, nor shall they hold part-time positions in institutions that conflict with private equity business.

Compared with the original review requirements, the requirement that executives must not take part-time jobs in institutions that conflict with private equity business is a new content. According to relevant regulations, the so-called "conflict business" includes: private lending, private financing, financial leasing, capital allocation business, small-scale wealth management, small-scale lending P2P/P2B、 Crowdfunding, factoring, guarantee, real estate development, trading platforms and other businesses.

5、 Clear requirements have been put forward for the number of employees

The new version of the filing notice clearly requires that according to the "Internal Control Guidelines for Private Equity Fund Managers", the total number of employees of the applying institution should not be less than 5, and general employees of the applying institution are not allowed to work part-time.

This filing notice clearly requires that the total number of employees must not be less than 5, and they must not be part-time employees. It is recommended that the applying institution declare according to the standard of 6-7 people when registering as a manager, and provide corresponding labor contracts and social security certificates, and at least 5 people must have a fund industry qualification certificate.

6、 For the first time, clear requirements have been put forward in the filing notice regarding shareholders' ability to contribute capital

The new version of the filing notice clearly requires that the applying institution should ensure a clear equity structure and there should be no situation of equity proxy holding. The investor should have the ability to contribute capital that matches their subscribed capital amount, and provide corresponding proof materials.

This filing notice sets out clear requirements for shareholders' ability to contribute capital for the first time. Based on past project experience, when applying for institutional shareholders to prove their investment ability, they can provide materials including but not limited to bank deposits, purchase records of wealth management products, property certificates, investment transaction receipts, etc; If it is a corporate shareholder, audited audit reports and tax certificates can be provided.

7、 More detailed identification scope of related parties

The new version of the filing notice clearly requires that if the applicant institution has subsidiaries (financial institutions holding more than 5% of the shares, listed companies, and other enterprises holding more than 20% of the shares), branches, related parties (financial institutions controlled by the same controlling shareholder/actual controller, private fund managers, investment enterprises, conflict business enterprises, investment consulting and financial service enterprises, etc.), the legal opinion should clearly state the basic information of the relevant subsidiaries, branches, and related parties' business registration information, the business development of the relevant institution, whether the relevant institution has been registered as a private fund manager, and whether there is business dealings with the applicant institution.

Through comparison, it is found that compared with the previous scope of related party identification, this filing notice will be more specific from "financial enterprises, asset management institutions or related service institutions controlled by the same controlling shareholder/actual controller" to "financial institutions, private fund managers, investment enterprises, conflict business enterprises, investment consulting and financial service enterprises controlled by the same controlling shareholder/actual controller".

This requires the applying institution to expand the scope of review for related parties when applying for fund manager filing. At the same time, according to the requirements, for related parties, they should focus on explaining their business operations and promise that there is no transfer of benefits between them and the applying institution.

8、 Clear requirements are put forward for the situation where multiple fund managers are under the same actual controller

The new version of the filing notice clearly requires that if there are new application institutions under the same actual controller, the purpose and rationality of setting up multiple private fund managers, differences in business directions, and how to avoid interbank competition should be explained. The actual controller and its registered affiliated private fund managers must make a written commitment that they shall bear corresponding joint and several liability for compliance and disciplinary consequences in case of any illegal or irregular situations during the operation of the newly applied institution.

For this filing notice, if the same actual controller controls multiple private fund managers, the association explicitly requires them to explain the purpose and rationality of setting up new fund managers, the differences in business directions, and how to avoid industry competition. It also requires the actual controller and other fund managers who have completed the filing to bear joint and several liability for the compliant operation of the applying institution. If the applying institution has the above situation, it is recommended that the applying institution provide detailed information on the investment direction, independence, and professionalism of each fund manager in the materials, and obtain a certificate issued by the local government or regulatory department to fully demonstrate the rationality of the existence.

9、 New suspension of processing situations

The new version of the filing notice clearly requires that if the applying institution encounters two or more of the following situations, the association will suspend the processing:
（1） The name of the applying institution does not highlight the main business of private fund management, and has the same or similar name as a well-known institution. The name contains misleading words such as "group" or "financial control" that may mislead investors;
（2） The office location of the applying institution is unstable or not independent;
（3） The application institution's business development plan is not feasible;
（4） The applying institution does not meet the requirements for specialized operation and deviates from the main business of private equity funds;
（5） The applying institution has significant outstanding liabilities or liabilities exceeding 50% of its net assets;
（6） Applying for institutional equity proxy or unclear equity structure;
（7） The actual control relationship of the applying institution is unstable;
（8） The applying institution evades the requirements of related parties or actual controllers through structural arrangements;
（9） Applicants for affiliation with institutional employees or senior executives, or those with insufficient professional competence;
（10） The applying institution fails to supplement and submit registration application materials within 6 months after receiving feedback from the association;
（11） Other circumstances recognized by the China Securities Regulatory Commission and the China Securities Investment Fund Industry Association.
The above-mentioned suspension of processing involves specific requirements in 11 aspects, including the name, business premises, business situation, financial situation, investors and actual controllers, equity structure, personnel, etc. of the applying institution. It is recommended that the applying institution avoid the above-mentioned situations when applying for fund manager filing, in order to prevent the extension of the filing application time.