Author: Li Jing
On November 14, a message that "Hangzhou's 3 billion quantitative private placement ran away, triggering tens of billions of FOF private placements and China Soft New Power stepped on thunder" caused an uproar.
Tens of billions of private equity **FOF institution Beijing China Soft New Power Private Equity ** Management *** hereinafter referred to as China Soft New Power) was pushed to the forefront of the storm and shocked the investment community.
Tens of billions of private equity FOF announcements one after another
There are relevant screenshots showing that (China Soft) New Power invested in Hangzhou Huisheng, then invested in Hangzhou Yuyao, and then invested in Panjing, and the pre-investment valuation table and post-investment performance were all fake.
On November 14, China Soft New Power issued a statement saying that the final actual investment managed by the company was to some private placement products of Shenzhen Huisheng Private Equity *** Management *** (hereinafter referred to as "Shenzhen Huisheng"), and it was difficult to redeem due to the default of Huisheng Private Placement.
In order to safeguard the legitimate rights and interests of investors, China Soft New Power stated that in response to the material breach of contract by Shenzhen Huisheng, the company will continue to disclose information to investors in relevant ** products, and take legal measures against Shenzhen Huisheng and related links to do its best to realize the legitimate rights and interests of investors.
China Soft New Power also said that the company is currently continuing to operate, and the rest of the first-class products under management are operating normally, and the company will continue to operate in compliance with a prudent and responsible attitude.
China Soft New Power explained to the channel, "The company's FOF invested in Hangzhou Huisheng. Hangzhou Huisheng previously claimed that it was doing quantitative hedging strategies, but later found that Hangzhou Huisheng only invested funds in Yu Yao's products after an investigation by China Soft New Power. China Soft New Power acted quickly, and last week it had already reported to arrest Hangzhou Huisheng, a private equity manager for product fraud. China Soft New Power apologizes for the mistakes in the investment and the troubles caused by some false market rumors caused to investors. (Huisheng Private Equity is registered in Shenzhen and its office is located in Hangzhou, so it may be mixed in terms of title).
It is worth noting that in the statement on November 14, it was stated that "the company has not entrusted any entity to release news on behalf of the company, and all notices and information related to the company and the company's ** products are subject to the official documents released by the company." ”
On November 14 and November 15, China Soft New Power successively released announcements on the official website on the change of investment managers and temporary opening of products. According to the announcement of the change of investment manager, Gao Yang took over from the previous ** manager Peng Dong for the change of investment manager for its 6 products.
According to another temporary opening letter, according to the relevant provisions of the "China Soft New Power Balanced Value No. 1 Private Placement **Investment*** Contract", it is scheduled to be temporarily opened to China Soft New Power Balanced Value No. 1 on November 16, and only redemption applications will be accepted on the temporary open day.
Jiang Han, a senior researcher at Pangu Think Tank, said that this incident exposed the multi-layer nesting risk and information asymmetry risk of the private equity industry.
Dong Yizhi, a lawyer at Shanghai Zhengce Law Firm, believes that this incident has also exposed issues such as how FOF institutions select managers and the responsibilities of trusteeship.
The private placement involved has received regulatory fines
The two private placements involved in this case are Shenzhen Huisheng Private Equity *** Management *** Hangzhou Yuyao Private Equity *** Management***
Shenzhen Huisheng Private Equity Management was established in January 2016, registered in Shenzhen, Guangdong, with offices in Hangzhou, Zhejiang, with a management scale of 1 billion to 2 billion yuan, and the company has 9 private placement products for the record, including a number of quantitative hedging products.
According to the China Investment Industry Association, Hangzhou Yuyao Private Equity Management used to be known as Hangzhou Yuyao Investment Management, with a management scale of 2 billion to 5 billion yuan.
It is worth noting that after inquiry, it was learned that Hangzhou Yuyao Private Equity Management is currently in a state of "abnormal operation".
On June 13, 2022, Hangzhou Yuyao Private Equity **Management*** was taken by the Zhejiang Securities Regulatory Bureau to issue a warning letter, and the reason for the punishment was that the Yuyao War Drum No. 5 Private Placement **Investment** issued and managed by the company had a total asset ratio of more than 200% to net assets from July 2021 to March 2022.
According to the Zhejiang Securities Regulatory Bureau's "Decision on Issuing a Warning Letter to Hangzhou Yuyao Private Equity Management", the above behavior violates the relevant provisions of Article 4, Item 7 of the Interim Provisions on the Operation and Management of Private Asset Management Business of ** Operating Institutions (CSRC Announcement 2016 No. 13). In accordance with the provisions of Articles 12 and 15 of the Interim Provisions on the Operation and Management of Private Asset Management Business of Business Institutions, it was decided to take the supervision and management measures of issuing a warning letter to Hangzhou Yuyao Private Equity Management, and recorded it in the market integrity file.
The Zhejiang Securities Regulatory Bureau also said that He Guoqing, as the legal representative, executive director and general manager of Hangzhou Yuyao Private Equity Management, did not perform his duties and obligations prudently and diligently, and was primarily responsible for the company's above problems.
According to the first financial report, a person familiar with the matter said, "The real behind-the-scenes bosses of Shenzhen Huisheng and Hangzhou Yuyao Private Equity Management are all Mao Wei, the actual controller of Panjing Investment." According to the person familiar with the matter, a listed state-owned enterprise had previously invested in Hangzhou Yuyao Private Equity ** Management *** 2900 million yuan, and Hangzhou Yuyao Private Equity Management failed to pay at the time of redemption, resulting in default. The inducement of the default was that Mao Wei had been controlled by the relevant departments before, and the capital chain was broken due to no one coordinating the funds, which led to a series of subsequent thunderstorms.
According to public information, the full name of Panjing Investment is Panjing Equity Investment Management (Shanghai)**hereinafter referred to as Panjing Investment). Founded in 2015, the legal representative is Li Chengxiang, the shareholders are Mao Wei and Han Shuqin, the shareholding ratio is 50%, and the actual controller is Mao Wei. Due to abnormal operation, Panjing Investment has been cancelled as a private equity manager by AMAC in September 2022.
It is worth noting that Mao Wei has repeatedly touched the regulatory red line.
In February this year, the Shanghai Securities Regulatory Bureau announced that it decided to file a case for investigation on Panjing Investment due to suspected private placement violations. On November 6, the Shanghai Securities Regulatory Bureau announced that Panjing was suspected of violating the "Interim Measures for the Supervision and Administration of Private Investment", and was to be ordered to make corrections, given a warning and fined 30,000 yuan; At the same time, the actual controller Mao Wei and Bai Jinlin, who was registered as the person in charge of information filling, were both given warnings and fined 30,000 yuan.
Rethinking the issues behind the private equity industry
After communicating with a number of people in the financial industry and the legal profession, they all believe that the relevant issues exposed by this incident are worth pondering.
Jiang Han pointed out that as a high-risk investment variety, private equity needs stricter supervision and information disclosure. As a new type of investment, private FOF also needs more standardized operation and risk control. In addition, some chaos in the private equity industry, such as information asymmetry and benefit transfer, also needs to strengthen supervision and governance.
Dong Yizhi believes that according to Article 15 of the Regulations on the Supervision and Administration of Private Investment, unless otherwise agreed in the contract, the property of private placement shall be entrusted by the custodian of private placement. Where private placement of ** assets is not to be trusted, the institutional measures and dispute resolution mechanisms to ensure the security of private ** assets shall be clarified. Therefore, theoretically, if the common contractual private placement and partnership private placement in the market directly invest in the underlying assets, it is not mandatory to have custody, but it is necessary to stipulate the content in the ** contract and set up institutional arrangements to ensure the safety of the property. For private placements with SPV categories, the funds are indirectly invested in the underlying assets through the SPV, so the custody model must be adopted for supervision.
Dong Yizhi said that in practice, whether it is a contract or a partnership type of private placement, it is still carried out in the mode of brokerage and bank custody, and with the improvement of the financial cognition of ordinary investors, investors prefer the private placement of tripartite custody compared with the private placement without custody. However, at present, there are three major contradictions in the field of private equity, one is the contradiction between the regulatory cognition and the investor's cognition caused by "custody services", the second is the contradiction between the cognition between different supervision and supervision, and the contradiction between "custody fees" and "custody responsibilities".
Jiang Han believes that when a private FOF invests in private equity, it should pay attention to selecting a private equity manager with good reputation and management ability, and conduct sufficient due diligence. In addition, we should pay attention to the investment strategy and risk control measures of private placement** to avoid the risk of being nested in multiple layers. Private FOF can avoid risks by establishing a risk control mechanism and regularly monitoring the investment and risk profile of private placements.
Jiang Han said: "When private equity FOF selects private placement products in the early stage, it is difficult to obtain heavy stocks and strategy information like public offerings because the private placement product information is not public. However, the private FOF can understand its investment strategy and risk control measures, as well as the supervision of the private placement** through communication and exchange with the private equity manager. In addition, private FOF can also rely on the power of professional institutions to conduct risk assessment and due diligence to ensure that the selected private equity products meet the compliance and risk control requirements. ”