CSRC Issues New Private Fund Disclosure Rules Effective Sept 1

On September 1, the Measures for the Supervision and Administration of Information Disclosure by Private Investment Funds, formulated by the China Securities Regulatory Commission (CSRC), took effect alongside the Detailed Implementation Rules for Information Disclosure by Private Investment Funds, issued by the Asset Management Association of China. This is the first administrative regulation implementing the Regulations on the Supervision and Administration of Private Investment Funds, marking the upgrade of private fund disclosure regulation from industry self-regulatory rules to the departmental rule level of the CSRC. The 2016 version of the disclosure measures, in effect for more than a decade, was simultaneously repealed. The new rules address industry pain points such as fund manager disappearance, opaque underlying assets, and investors' lack of recourse, through mechanisms including look-through disclosure, interim reporting of major events, and custodian review.

The new rules establish a regulatory framework of "departmental rules plus industry self-regulation" and require look-through disclosure for multi-layer nested structures. They also adjust disclosure frequency for equity funds, allowing routine disclosure to be reduced to an annual basis while raising quality requirements through audits and mandating disclosure of key financial metrics such as DPI, TVPI, and IRR.

The interim reporting system for major events specifies disclosure deadlines. Major events fall into 11 categories, including convening of fund holder meetings and related resolutions, changes of manager or custodian, changes to fund manager, duration, investment scope, or strategy, material related-party transactions, adverse developments in major investment targets, fund liquidation, and major litigation or arbitration.

At the institutional practice level, the specific content of disclosure results from coordination across multiple departments. Accurately, timely, and completely obtaining and organizing effective information for disclosure requires adequate staffing and sound internal processes. For multi-layer nested funds, the initial disclosure poses significant challenges, requiring lower-tier funds to cooperate in providing details of underlying assets. The new rules also emphasize interim disclosure of major matters affecting investor interests, covering a broad scope with high timeliness requirements. Managers are required to embed fiduciary duties related to disclosure obligations into their internal systems and build robust disclosure processes. With the implementation of the new rules, information disclosure requirements for the private fund industry have been comprehensively upgraded.