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Overview of the Checklist for PFM Registration

2020.03.03 XIE, Qing (Natasha)、QIN, Tianyu

On February 28, 2020, the Asset Management Association of China (AMAC) published the Circular on Matters Concerning Facilitating Applications for Private Fund Manager Registration ("Circular") on its website. The Circular includes two checklists summarizing the requirements for the application materials needed for private fund manager (PFM) registration ("Checklist"). The items on the AMAC’s Checklist are not new requirements. As pointed out in the Circular, the Checklist is prepared based on the existing requirements for PFM registration as set forth in current laws, regulations, self-regulatory rules and the Guidelines for Private Fund Manager Registration as well as past practices, and is intended to assist the institutions applying for PFM registration (“applicants”) in the preparation of the required materials for such registrations and shall not be construed as to include any revision to the standards and requirements for PFM registration. Notably, the AMAC specifies that for any major change concerning controlling shareholder/actual controller of a registered PFM, applicants shall refer to and comply with the Checklist when preparing materials for a change in registration.


For your reference, we have prepared below a summary of the important points in the Checklist and the Circular.


Checklist for Application Materials


The Checklist clearly sets out in detail the nine areas of materials required for a PFM registration application, and clarifies the specific requirements for their content and form (e.g. the format of the uploaded documents, signatures and seals).



1. Basic Information of the Institution 


1.1Letter of undertaking for registration 


The AMAC offers a template for the letter of undertaking for registration in the AMBERS system where an applicant shall ensure in writing that (i) the materials and information provided by the applicant for PFM registration and on-going updates are true, accurate and clear of any false record, misleading representation or major omission; (ii) the applicant and its employees will strictly abide by the requirements of relevant laws and regulations; and (iii) the applicant will not breach relevant bottom lines set for the private fund industry when conducting private fund business. The information provided in such letter of undertaking shall be consistent with the information filed with the company registration authority and the AMBERS system.


1.2Certificate of paid-in capital 


An applicant shall submit a bank receipt affixed with the company seal of the bank or a capital verification report affixed with the company seal of the accounting firm, and the investor(s), subscribed capital, and paid-in capital recorded thereto shall be consistent with the information filed with the company registration authority. If the investor(s) changes after the capital contribution is paid in, then the applicant may provide the original certificate of paid-in capital together with the equity transfer agreement and the bank receipt for the equity transfer funds, or alternatively prepare a new capital verification report. The Checklist specifically states that if the paid-in capital is less than 2 million RMB or the proportion of paid-in capital does not reach 25% of the total registered capital, then the AMAC will flag it in the PFM information publicity system.


1.3Articles of Association of the PFM


An applicant shall upload its latest Articles of Association together with all amendments.


1.4Organization code, tax registration, and business certificates


Given that most companies have been issued a unified business license which serves the purpose of all three certificates, namely, the organization code certificate, the tax registration certificate and the business license, the three certificates referred to herein shall refer to the business license only.


1.5The resumes and social insurance payment certificates for all employees


The resume of each employee shall set forth his/her basic information, education background and work experience. With respect to the requirements for the social insurance payment certificates, (1) for an applicant handling social insurance payments on their own, it shall submit social insurance payment records showing employees’ names and the name of the institution, while for employees newly subscribing to social insurance with no payment record, it shall provide records showing new social insurance subscriptions; (2) for an applicant entrusting a third party human resources service provider to make social insurance payments, it shall submit the entrustment agreement for social insurance payments entered into with the service provider, the qualification certificate of the service provider and the payment records; for employees rehired after retirement, the institution shall also upload such employees’ retirement certificates. The social insurance payment records shall be affixed with the seal of the competent social insurance authority.


1.6Proof of the right to use office space


(1)For office space directly rented by the applicant, the lease agreement and a copy of the property ownership certificate shall be provided;


(2)For subleased office space, the original lease agreement, the sublease agreement, the confirmation documents showing the property owner’s or the property manager’s consent to the sublease shall be provided;


(3)If the office space is provided by a shareholder or, an affiliate for free, the original lease agreement or property ownership certificate, the proof for free use, and the confirmation documents showing the property owner’s or the property manager’s consent to use shall be provided.


1.7Business plan


The applicant shall provide details of its application plan in the business plan. The Checklist for the first time clarifies what details shall be covered in the respective business plans of securities type PFMs and non-securities type PFMs, namely, (1) for a securities type PFM, its business plan shall include introduction of the investment team, the area of investment, fundraising methods, methods for selection of investment targets, trading structure of fund product(s), funding sources and investment strategies, the company’s future business plans, operation planning and current business needs, etc.; (2) for a non-securities type PFM, its business plan shall provide investment types, underlying assets of investments, fundraising methods, methods for selection of investment targets, trading structure of fund product(s), funding sources and investment strategies. It shall also list out the key features of the first fund product. The AMAC specifically clarifies in the Checklist for a non-securities type PFM that the business plan shall not use templates and shall provide in detail the actual business plan of the applicant. 


1.8Reasonable explanation on the establishment of a new PFM of the same type as the existing PFM


If the actual controller/largest shareholder of an applicant has already set up a PFM of the same type, the actual controller/largest shareholder is required to submit a reasonable explanation on the establishment of a new PFM of the same type, illustrating the purpose and reasonableness of setting up multiple PFMs of the same type, the differences between the business directions, and methods for avoiding competition in the same area.


1.9Documentations for intended investment projects (for non-securities type PFMs)


This item is not mandatory. If the applicant has already executed the relevant project agreement with an enterprise, it shall submit the investment agreement or letter of intent to cooperate for the project to be invested, the contact information of the project partner(s), and the relevant government approvals for acting as the fund manager of a government venture capital fund.


1.10Letter of undertaking issued by affiliated PFM to assume joint liabilities for noncompliance of the applicant 


If any affiliate of the applicant has already been registered as a PFM, or the controlling/largest shareholder of the applicant has already been registered as a PFM, then such affiliated PFM shall issue a letter of undertaking ensuring that if the applicant violates any laws or regulations when conducting business, the affiliated PFM shall be liable for the corresponding liabilities incurred by the noncompliance of the applicant and the relevant self-regulatory penalties.


1.11Other relevant documentation


The applicant may submit by uploading the relevant supporting documents, such as government supporting documents, proofs of bidding and tendering, relevant approvals related to government venture capital funds, reference letters/recommendation letters issued by leading institutions in the industry, which are obtained during the course of establishment or on-going business operation.


2. Relevant Internal Policies


The Checklist sets out the basic internal control policies that a PFM shall possess, namely,  for (1) operating risk control, (2) information disclosure, (3) recording internal transactions, (4) investment trading to prevent insider trading and conflicts of interest, (5) risk disclosure for qualified investors, (6) internal review process for qualified investors, (7) private fund marketing, promotion and fundraising, (8) fair trading, (9) reporting employees’ purchase and sale of securities, (10) other controls (such as regulating related party transactions and preventing interest tunneling). The Checklist specially emphasizes that the applicant shall customize the relevant internal policies according to its unique needs rather than directly copy others. Although the Checklist does not distinguish between the securities type PFMs and non-securities type PFMs in terms of the requirements for internal policies, we believe that the abovementioned Items (8) and (9) shall only apply to securities type PFMs.


3. Information Regarding Financial Licenses Obtained and Affiliates




3.1Letter of undertaking issued by affiliate that has a conflict of interest in current business and the relevant approval certificate for conducting conflicting business 


If the business scope of any affiliate of the applicant includes private lending, private financing, financial lease, stock financing business, small-amount wealth management, small-amount lending, P2P (i.e. peer-to-peer lending) or P2B (i.e. person-to-business lending), crowd funding, factoring, guarantees, real estate development, trading platforms and other business that conflicts with the private fund business, the applicant and the affiliate conducting any conflicting business shall, jointly or separately, issue a letter of undertaking that ensures (i) there is no interest tunneling; and (ii) the applicant itself and the private funds it proposes to manage in the future do not engage in the aforementioned businesses that may conflict with the characteristics of private investment funds. The Checklist also requires affiliates conducting those businesses, excluding real estate and including business such as small-amount lending, financial lease, commercial factoring, financing guarantee, Internet finance, pawning, to provide formal approvals issued by competent government authorities for such businesses.


4. Credit Records


4.1Notice of penalties issued to the applicant


If during the most recent three years an applicant has been subject to any criminal penalties, administrative penalties imposed or supervisory measures taken by the China Securities Regulatory Commission (CSRC), administrative penalties imposed by other regulatory authorities, self-regulatory measures taken by the AMAC or other self-regulatory organizations, or has been involved in any litigation or arbitration, it shall submit relevant documents.


5. Financial Information


5.1Balance sheet, profit statement, cash flow statement (in Excel file);


5.2Audit report and audited financial report: mandatory if an applicant has been established for one fiscal year, optional if the applicant has been established for less than one fiscal year. The Checklist further specifies that if the date of the annual audit report is much earlier than the date of application, then the applicant shall upload its financial report of the most recent quarter of the current year which is not required to be audited.


6. Investor Information 


6.1Business license or qualification certificate (if it is a non-natural person investor)


Copies of the business license or qualification certificate shall be affixed with the company seal of the non-natural person investor.


6.2Scanned copy of proof of identity, certificate of degree/diploma 


(1)Scanned copy of proof of identity, such as ID card, Mainland travel permit for Taiwan residents, Exit-Entry Permit for Travelling to and from Hong Kong and Macao, passport, etc.


(2)Degree/diploma certificate:

(a)Certificate of degree, graduation certificate, completion certificate (only when the highest education received is senior high school), etc. for senior high school or above.

(b)Certification document of academic diploma/degree issued by the Ministry of Education for foreign degree/diploma obtained (no need to submit if the foreign degree/diploma was obtained in the early years when such certification was unavailable).


If the certificate of degree has been lost, the investor may upload a valid certificate issued by the relevant institutions (such as the school the investor graduated from or the institution where the investor’s personnel file is deposited with) or a report verifying the authenticity of the education background issued by the China Higher Education Student Information (CHSI) website.


The Checklist specifies that the education background provided shall be consistent with the certificate of degree obtained.


6.3Proof of paid-in capital


The proof of paid-in capital herein shall be identical with Item 1.2 above.


6.4Statement explaining the reasonableness of the shareholding structure of the applicant


If the shareholding structure of the applicant has more than three layers of holding of shares, then the applicant shall explain the reasonableness and necessity of setting up such a multilayer shareholding structure. If the ultimate investor by look-through is a SPV(special purpose vehicle), then the applicant shall state the purpose and funding source of such SPV.


If the shareholder is a local government financing platform, the applicant shall issue a letter of undertaking ensuring that it shall comply with the provisions of the Circular on Further Regulating Debt Financing of Local Governments (Cai Yu [2017] No. 50) and the Circular on Matters Concerning Regulating Investment and Financing by Financial Enterprise to Local Governments and State-owned Enterprises (Cai Jin [2018] No. 23) in the course of operation.


6.5Letter of undertaking ensuring shareholding platform does not engage in business operations 


If the investor is only a shareholding platform, the investor shall issue a letter of undertaking to ensure that it is only a shareholding platform and will not carry out any business operations. The letter of undertaking shall be affixed with the company seal of the investor.


6.6Proof of investor’s funding capacity


For a natural person investor: fixed assets (property ownership certificates for real properties other than the first real property purchased by the investor), non-fixed assets (including but not limited to proof of salary and income, tax clearance certificates, proof of wealth management proceeds, proof of spouse’s income); for balance of bank accounts or amount of assets under management, the investor may provide bank statements of the most recent half year and proof of financial assets; if family assets are involved, the investor shall describe the source of such family assets.


For a non-natural person investor: the reasonableness and legitimacy of the sources of operating income shall be justified by the time of establishment, the actual business conditions and the revenue status of the investor; documentation such as an audit report shall also be provided.


The Checklist further provides that the proof of funding capacity shall include asset ownership certificates and proof of legitimate sources of such assets.


7. Actual Controller/Largest Shareholder


7.1The non-natural person actual controller/largest shareholder shall provide its business license or the qualification certificate. The natural person actual controller/largest shareholder shall provide a scanned copy of his/her proof of identity and certificate of degree/diploma. The detailed requirements for such documents are identical to those stipulated under Items 4.1 and 4.2.


7.2A chart showing the relationship between the actual controller and the PFM


The actual controller refers to the controlling shareholder or a natural person, legal person, or other organization that can actually control the operation of the enterprise. For the purpose of determining the actual controller, it shall be looked through up to ultimate investor in the form of a natural person, a listed company, a state-owned enterprise or a foreign institution regulated by foreign financial regulatory authorities.


According to the Checklist, the chart shall indicate all of the applicant’s direct investors and their respective ratios of capital contribution, as well as disclose the ultimate investors via layer-by-layer look-through of each direct investor (i.e. a natural person, an actual controller of a listed company, a government department, a government-sponsored institution, etc.). Apart from identifying the actual controller by look-through from controlling shareholder up to the ultimate investor, the reason for identifying other person or entity as the actual controller shall be briefly addressed below the chart; if there is an acting in concert agreement in place or other contractual arrangements, the relevant documents shall be attached to the chart and uploaded together with the chart. The actual controller shall sign or affix company seal on the chart.


Additionally, if the applicant determines the actual controller by virtue of the acting in concert agreement, it shall also upload such agreement.


7.3Letter of undertaking issued by actual controller to maintain actual control and assume liabilities for noncompliance of the applicant


If any affiliate of the applicant has been registered as a PFM, or the controlling/largest shareholder of the applicant has been registered as a PFM, then the largest shareholder and the actual controller of the applicant shall respectively issue a letter of undertaking ensuring that it will continue holding the equities in the applicant or maintain the actual control for no less than three years after the applicant completes its PFM registration. Meanwhile, the actual controller shall ensure that if the applicant violates any laws or regulations in the course of business, the actual controller shall be liable for the corresponding liabilities incurred by such noncompliance of the applicant and the relevant self-regulatory penalties.


In addition, if the actual controller of the applicant is a natural person and does not serve as a senior management officer of the applicant, then the applicant shall explain the reasons for such arrangement and how the actual controller participates in the operation and management of the applicant without serving as a senior management officer of the applicant.


8.Senior Management Personnel


8.1Scanned copy of proof of identity, certificate of degree/diploma 


The requirements are identical to those stipulated under Item 4.2.


8.2Employment contract and social insurance payment records


The applicant shall submit the employment contracts entered into with the senior management personnel. If a senior management officer is appointed by a state-owned enterprise, then the applicant shall provide the appointment document issued by the appointer.


The requirements for social insurance payment records are identical to those stipulated under Item 1.5.


8.3Letter of undertaking issued by senior management personnel 


The senior management personnel of the applicant shall ensure in writing that the basic information, credit records and information regarding his/her part-time positions and temporary positions served, which are disclosed in the legal opinion and filed with the AMBERS system, are true, accurate and complete, and that all credit records and information regarding his/her part-time positions and temporary positions served have been uploaded to the AMBERS system.


8.4Proof of investment management experience of senior management personnel and employees of investment team


For securities type PFMs: we understand from the Checklist that if the AMAC questions the professional expertise of the senior management personnel or the investment personnel in the course of reviewing the relevant information for the first time, then the applicant may be required to provide the traceable investment performance records of its current senior management personnel or investment personnel for more than six consecutive months in the most recent three years (including but not limited to documentation demonstrating his/her management of securities type fund products, trading records of securities and futures, but excluding simulation disks). At the same time, the lawyers engaged by the applicant shall give a conclusive opinion on the authenticity of the aforesaid documentations in a supplementary legal opinion. Such documentations shall reflect the size of the investment funds, the investment period, the investment performance, the investment portfolios and returns, and shall be addressed one-by-one in the supplemental legal opinion. The applicant may also provide other materials capable of proving the professional expertise of the senior management personnel and the employees of the investment team with respect to their positions or in the field of private investment funds.


For non-securities type PFMs: according to the Checklist, the applicant shall provide evidence showing the successful withdrawal from any equity investment (including venture capital) by its senior management personnel or investment personnel, including but not limited to the materials showing his/her management of the product(s) or the withdrawal materials; materials capable of proving the professional expertise of the applicant’s senior management personnel and the employees of the investment team with respect to their positions or in the area of private investment funds.


9. Legal Opinion for PFM Registration


The Checklist provides that the lawyers issuing the legal opinions may voluntarily choose to upload the relevant documents and records regarding the due diligence check conducted on the applicants.


With respect to the submission of required documents for PFM registration, the AMAC implements “new-old-cut” rules for applications submitted before and after March 1, 2020. The applicants submitted application materials on or after March 1, 2020 shall comply with the Checklist, whereas for applicants that have already submitted registration applications and have not been approved before March 1, 2020, the AMAC has provided relevant rules for the transitional period.


The AMAC further specifies in the Circular that if an applicant has submitted all the materials required for PFM registration in accordance with the Checklist, the AMAC will only review or inquire further about the items listed in the Checklist, and will not inquire about matters not included on the Checklist, which we believe will effectively improve the efficiency of PFM registration. If an applicant fails to submit all required materials in accordance with the Checklist, the AMAC will return the application materials within five working days. If in the second submission the applicant still fails to submit all the required materials or information in compliance with the Checklist, the AMAC will suspend handling the application in accordance of the Guidelines for Private Fund Manager Registration.


Providing Ongoing Updates on the Status of PFM Registration Applications


While improving the efficiency of PFM registration, the AMAC has also enhanced the transparency of PFM registration. Pursuant to the Circular, starting from March 1, 2020, the AMAC will publish "PFM Registration Status" on its website to facilitate public access to the basic information of applicants, the updated status of their applications and information concerning the law firms and lawyers in-charge serving the relevant applicants. An applicant can also get real-time updates of its application status via the AMBERS system.


Access to Additional Information


The Circular further provides that, commencing on March 1, 2020, the AMAC will, among others that have been publicized, provide the public with access to the following information in the PFM Registration Status section of its website, namely, (1) the name of the actual controller of a registered PFM, (2) names, titles and resumes of senior management personnel that have been reported to and filed with the AMAC; and (3) affiliated PFM controlled by the same actual controller.


Moreover, the AMAC will gradually develop advanced search functions on its website to provide the public with access to the information about the shareholders of PFMs and the law firms serving PFMs.


We will continue to monitor the situation and keep our clients apprised of any important developments.

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