South Korea stipulated rules on the private equity systematically in its Capital Market Law, and pushed its stable development by multiple alterations of overly strict legislations on private equity. Recently, China has continued the perfection of relevant regulations and established private equity legislation system as well. The Interim Measures for the Supervision and Administration of Privately Offered Fund (Aug 21st, 2014; hereinafter referred to as “Interim Measures”) has already become an important regulation on the private equity. Furthermore, China actively promotes the enactment of Interim Ordinances for the Supervision and Administration of Privately Offered Fund (Aug 30th, 2017, draft for comment; hereinafter referred to as “Interim Ordinances”), and has supplied several special regulations like Measures for the Administration of Information Disclosure of Privately Offered Funds (Feb 4th, 2016) and Measures for the Proper Management of Investor Suitability (July 1st, 2017; hereinafter referred to as “Propriety Measures”) for the perfection of supervisions on private equity. We can observe, from two countries’ progress in regulatory legislations, that South Korea experienced a strict-to-mild course, which is just the opposite of China’s.
In terms of the concept definition of private equity, Chinese legislation uses the term privately offered fund that means a privately formed collective portfolio under the jurisdiction of CSRC. While under the jurisdictions of financial institutions like insurance companies and banks, the term private formed asset management is used instead of the former one. In order to regulate the asset management business of financial institutions as well as unify supervisory standards of asset management products in the same categories, PBC, CBRC, CSRC and FECB jointly released the Guidance on Regulating the Asset Management Business of Financial Institutions (April 27th, 2018). According to the guidance, regulations on the privately formed asset management should be widely rectified. Since relevant regulations on CSRC’s private equity are almost in accordance with the guidance, the research emphasizes the study on the stipulations on privately offered fund.
The paper carries out a main comparative study on the access mechanism of private equity manager, standard of qualified investor, recommendation of placing, and information disclosure. In regard to private equity access mechanism, China laid emphasis on the regulations of manager registration. Yet the lack of specific registration requirements may subsequently result in the possibilities of policy interferences with the manager’s access. With respect to the provisions on the qualified investor, there are still overlaps and contradictions, although China has already enumerated specific provisions where an enhanced systemization is to be expected. In terms of the recommendation of placing in Propriety Measures, China distinguished ordinary and professional investors, the latter’s determination of which adopted double standards (property and experience standards) that could be seen as a more advanced system than Korea’s. In addition, specified provisions on the proper management obligations are seen in Propriety Measures, the idea of which is similar to Korea’s Principle of Propriety or Principle of Suitability. However, it is worth learning that Korea has already perfected the specific connotation of the Principle of Propriety in a great degree by its judicial practice. Last but not least, in terms of information disclosure, a boundary between collection and operational phases in private equity can be seen in Chinese stipulations. Since both the phases request for information disclosure, it is more promising in the protection for the investors. In conclusion, compared to Korean systematic stipulations there are still deficiencies in Chinese regulatory legislations on the private equity. Yet some provisions are more advanced due to China’s benign references to such countries’ progressive systems as America’s, Korea’s and Japan’s.