· Area of Law： Securities

· Level of Authority： Industry Regulations

· Date issued：03-27-2018

· Effective Date：03-27-2018

· Status： Effective

· Issuing Authority： Associations

Announcement of the Asset Management Association of China on Submitting Special Legal Opinions by Private Fund Managers under Abnormal Operation Circumstance
(Adopted at the fourth meeting of the second council of the Asset Management Association of China on March 23, 2018)
For the purposes of strengthening the self-disciplinary management of the private fund industry, establishing and improving the industry honesty restraint mechanism, protecting the lawful rights and interests of investors, advancing the sound development of the industry, and fully maximizing the role of law firms in providing legal professional services, according to the Securities Investment Fund Law, the Interim Measures for the Supervision and Administration of Privately Offered Investment Funds, the Measures for the Registration of Private Fund Managers and Recordation of Funds (for Trial Implementation), the Implementation Measures of the Asset Management Association of China for Disciplinary Actions (for Trial Implementation) and other laws and regulations as well as self-disciplinary rules, the relevant institutional arrangements for submission of special legal opinions by private fund managers under abnormal operation circumstance are further specified as follows:
I. Abnormal operation circumstance for submitting special legal opinions
A private fund manager and its legal representative, senior executive, actual controller or major contributor falling under the following circumstances which may affect the private fund manager's continuous compliance with the provisions on registration shall submit special legal opinions to the Asset Management Association of China (“AMAC”):
(1) It is docketed for investigation by the public security authority, the procuratorial authority or the supervisory authority.
(2) It is listed as a seriously dishonest person by an administrative authority and listed as a dishonest person subject to enforcement by a people's court.
(3) It is subject to administrative penalties imposed upon by the securities regulatory department or disciplinary actions imposed upon by the exchange and other self-disciplinary organizations, and falls under serious circumstances.
(4) It refuses or obstructs the supervisor or self-disciplinary management personnel to exercise the power of supervisory inspection and investigation or self-disciplinary examination according to the law.
(5) The securities regulatory department suggests that the AMAC should take self-disciplinary management measures due to serious violations of laws and regulations.
(6) It is subject to real-name complaints by investors for multiple times, is suspected of violating the laws and regulations, as well as the self-disciplinary rules, infringes upon the lawful rights and interests of investors, and fails to reasonably explain the matters complained to the AMAC and investors.
(7) It falls under the circumstances under which registration is disapproved as set out in the Questions and Answers regarding Private Fund Registration and Recordation (XIV) during the process of business operation.
(8) Other serious violations of the relevant provisions of the laws and regulations, the Guidelines for the Internal Control of Private Fund Managers and other self-disciplinary rules, out of business management control, major risks, and infringement upon the rights and interests of investors.
II. Procedures and requirements for submitting special legal opinions
(1) Where a private fund manager and its legal representative, senior executive, actual controller or major contributor fall under the aforesaid abnormal operation circumstance, the AMAC shall notify the private fund manager in writing of entrusting a law firm to verify the relevant matters and submit special legal opinions within three months.
(2) Where a written notice of the AMAC cannot be served on a private fund manager, the private fund manager will be deemed a missing institution, and shall undergo the formalities under the relevant procedures and even be canceled.
(3) When the abnormal operation circumstance of a private fund manager affects the judgment of potential investors or involves the interests of the public, the AMAC's written notice, the explanations of the private fund manager and the special legal opinions submitted will be disclosed on the AMAC's website.
A private fund manager shall report its abnormal operation circumstance to the local office of the securities regulatory department where he or she is located and submit the special legal opinions issued by the law firm entrusted thereby for recordation.
Where he or she is docketed for investigation by the public security authority, the procuratorial authority or the supervisory authority, is ordered to cease the relevant qualifications for business development, is subject to compulsory measures and falls under serious circumstances, the AMAC will, from the date when a written notice is issued, suspend the acceptance of an application of the private fund manager for recordation of fund, an application of the private fund manager for modification of relevant important matter and an application of a relevant affiliated party for formation of a new private fund manager.
III. Requirements for law firms and signatory attorneys issuing special legal opinions
A law firm and signatory lawyer issuing special legal opinions shall have corresponding practicing capacity and meet the following conditions:
(1) The law firm has not issued any legal opinions on registration or recordation of the private fund manager.
(2) The law firm has well-regulated internal management, sound compliance risk control, and high practicing standards, and observes the professional ethics and practicing disciplines.
(3) The signatory lawyer has rich practicing experience in legal services for securities funds.
(4) The law firm and signatory lawyer has not received any administrative penalty from the securities regulatory department or has not been subject to administrative regulatory measures in the most recent three years, and is not listed in the restricted list of unacceptable legal opinions by the AMAC.
IV. Requirements for special legal opinions
(1) The statement of the legal opinions shall specify: “ In accordance with the Securities Law, the Securities Investment Fund Law and the requirements of the China Securities Regulatory Commission and the Asset Management Association of China, having strictly performed their statutory duties, observed the principles of due diligence and good faith, and conducted sufficient checking and verification, this law firm and its designated lawyers hereby undertake that in this Legal Opinion, the facts found are true, accurate, and complete, the conclusion is legal and accurate, and there is no false record, misleading statement, or material omission, and that they will assume the corresponding legal liabilities set out in the Securities Law, the Securities Investment Fund Law and other laws.”
(2) The text of legal opinions shall specify the relevant factual materials, inspection principles, inspection methods, inspection content, inspection procedures, inspection results, laws and regulations and self-regulatory rules based, conclusion and necessary documents and documents involved.
(3) The text of legal opinions shall specifywhether the law firm and lawyer assume joint and several compensatory liability with the private fund manager, if the legal opinions issued thereby contain any false record, misleading statement or material omission, and cause losses to the property of others.
(4) The legal opinions shall specify whether the private fund manager cooperates with the law firm's special verification work. The law firm shall faithfully describe a private fund manager's concealment, obstruction, intentional omission and incoordination found thereby.
(5) The legal opinions shall contain specific conclusion on the inspection items requested by the AMAC one by one, specifically explain whether the inspection items are valid and compliant and whether they are authentic and effective, and fully demonstrate and analyze the conclusion and explain the inspection process, without any vague phrases such as “basically comply with” and “not found.”
(6) The legal opinions shall, according to the relevant provisions of the Announcement on Several Matters concerning Further Regulating the Registration of Private Fund Managers, re-inspect whether the private fund manager satisfies the requirements for registration after the abnormal operation circumstance occurs.
V. Handling of the special legal opinions by the AMAC
(1) Where a private fund manager fails to submit special legal opinions in compliance with the provisions within 3 months after the written notice is issued, the AMAC will, in accordance with the relevant provisions of the Announcement on Several Matters concerning Further Regulating the Registration of Private Fund Managers, conduct deregistration of the private fund manager that shall not re-apply for registration after deregistration. The legal representative, senior executives and other employees of the private fund manager shall be subject to disciplinary actions as violators of self-regulatory management, be disqualified for fund practicing under serious circumstances, and be blacklisted. After a private fund manager is canceled, the relevant institution shall not raise funds to set any private equity fund. The private equity funds for which the recordation formalities have been undergone shall be appropriately handled in accordance with the laws and regulations as well as the contract, and the lawful rights and interests of investors shall be effectively protected.
(2) Where it is determined in the special legal opinions issued by a member law firm that the private fund manager satisfies the registration requirements, the AMAC will resume the normal business of the private fund manager. A private fund manager that is determined to no longer satisfy the registration requirements shall be deregistered.
(3) The special legal opinions issued by non-member law firms falling under complex circumstances may be submitted by the AMAC to the Self-regulatory Supervision Committee of the AMAC for review, mutatis mutandis to, the “Implementation Measures for Disciplinary Actions (for Trial Implementation).” Where the Self-regulatory Supervision Committee of the AMAC deems upon review that the abnormal operation circumstance of the private fund manager does not affect its compliance with the provisions on registration, the normal business of the private fund manager shall be resumed; otherwise, the private fund manager shall be deregistered.
(4) Where a law firm issuing special legal opinions to a private fund manager fails to perform the due diligence obligation and the legal opinions contain false record, misleading statement or major omission, the AMAC will no longer accept any legal opinions from the relevant law firm, transfer it to the China Securities Regulatory Commission, the relevant judicial administrative department and the lawyers association for investigation and punishment according to the law, and disclose it on its website.

Asset Management Association of China
March 27, 2018