Shenzhen Regulator Orders Private Fund Compliance Review by Oct 15

The Shenzhen Securities Regulatory Bureau has recently issued a notice initiating the 2026 compliance self-inspection for private investment funds in its jurisdiction. All private fund managers in the area must complete the self-inspection by October 15, 2026, reviewing each item against the "Self-Inspection Worksheet for Private Fund Managers" to identify non-compliant practices and submit rectification plans.

The inspection, organized in line with the work arrangements of the China Securities Regulatory Commission, covers six major areas: compliance of shareholder capital contributions, managers' engagement in unrelated or conflicting businesses, related-party situations, fund promotion and marketing, investor suitability management, and compliance of investment operations. Managers are required to conduct the self-inspection in accordance with the Securities Investment Fund Law, the Regulations on the Supervision and Administration of Private Investment Funds, and relevant self-regulatory rules of the Asset Management Association of China. The "Self-Inspection Summary Table" in the worksheet lists approximately 45 specific inspection items, broadly covering the various violations that have been the focus of private fund regulation in recent years.

In terms of capital contributions and suitability, the inspection focuses on whether employee and shareholder contributions are significantly higher than their daily income and asset conditions, whether natural-person investors contributing more than RMB 10 million have contributions clearly mismatched with their income and assets, whether unregistered partnerships are subject to look-through checks on investor suitability with supporting documents retained, and whether there are oral or contractual arrangements for proxy shareholding. On investment operation compliance, key checks include whether loans and guarantees provided by funds to investment targets exceed 20% of the fund's net assets, whether the term exceeds one year with rolling extensions, whether investment agreements contain significantly unreasonable conditions or calculate repurchase prices based on principal plus fixed returns, whether valuation adjustment mechanism agreements require repurchase or cash compensation at fixed returns regardless of operating performance, whether convertible bond agreements lack conversion conditions and effectively become loans, and whether distributions to investors are based on fixed yields rather than actual investment returns. The regulator also screens abnormal trading situations, such as credit bond trades with prices deviating more than 10% in an unfavorable direction and block trades of individual stocks with price deviations exceeding 5%.

Regarding related-party transactions and liquidity, for products mainly investing in assets traded by agreement or in low-liquidity auction-traded assets with counterparties being related parties, managers must check whether related-party transaction management systems are established, decision-making and approval procedures are followed, and disclosures are made to investors. Additionally, for products with more than 50% of net assets invested in the New Third Board, private placements, or agreement-transfer funds, the inspection requires checks on the frequency and open-period arrangements. On unrelated businesses and nesting, the review explicitly checks whether managers participate in distributing products issued by financial exchanges, pseudo-exchanges, or licensed financial institutions, whether they engage in structured bond issuance and collect consulting fees, whether they provide intermediary or financing advisory services, whether they conduct unrelated activities such as fortune-telling or genealogy compilation at their offices, and whether income from other businesses exceeds 20% of total operating revenue. It also checks whether, after September 2023, there are nested structures where underlying assets are reached through more than two layers of private funds or asset management plans.

According to data from the Asset Management Association of China, as of the end of July 2026, Shenzhen had 2,701 registered private fund managers, managing 17,820 funds with a total scale of RMB 2.28 trillion, ranking third nationally in both manager count and management scale, accounting for 8.87% of the national total. Industry-wide, as of the end of July 2026, there were 18,512 private fund managers, managing 144,700 funds with a total scale of RMB 25.73 trillion, an increase of RMB 2.07 trillion from RMB 23.66 trillion at the end of June, surpassing RMB 25 trillion for the first time and hitting a record high for the tenth consecutive month. Among these, the scale of private securities investment funds exceeded RMB 9 trillion for the first time, reaching RMB 9.10 trillion; private equity investment funds stood at RMB 11.93 trillion, and venture capital funds at RMB 4.45 trillion.

On the issuance side, in July 2026, 2,601 new private funds were filed, with a newly filed scale of RMB 122.175 billion, exceeding RMB 100 billion for the second consecutive month. Of these, private securities investment funds accounted for 1,763 funds with a newly filed scale of RMB 72.809 billion, nearly 60% of the total; private equity investment funds numbered 152 with a scale of RMB 18.848 billion; and venture capital funds numbered 686 with a scale of RMB 30.519 billion.