· Area of Law： Securities

· Level of Authority： Industry Regulations

· Date issued：03-18-2016

· Effective Date：03-18-2016

· Status： Effective

· Issuing Authority： Associations

Questions and Answers regarding Private Fund Registration and Recordation (VIII)
(Asset Management Association of China, March 18, 2016)
Question: What are the basic requirements for a Legal Opinion on the Registration of a Private Fund Manager and a Special Legal Opinion on a Major Modification of a Private Fund Manager?
Answer: In view of the Legal Opinion on the Registration of a Private Fund Manager and the Special Legal Opinion on a Major Modification of a Private Fund Manager submitted (hereinafter referred to as the “Legal Opinions”), they have generally played the role of due diligence of professional legal service providers and the role of checks and balances of intermediaries. Nevertheless, problems, such as the lack of a description of the due diligence process or a basis for judgment in the Legal Opinions, similar content in multiple Legal Opinions, simple conclusions, and failure to verify information entered in the system by the applicant, still exist. The general requirements for the content and format of the Legal Opinions issued by a law firm and its designated lawyers are hereby explained as follows:
(1) As required mutatis mutandis by the Measures for the Administration of the Securities Legal Services of Law Firms and the Practicing Rules for the Securities Legal Services of Law Firms (for Trial Implementation), the Legal Opinions issued by a law firm and its designated lawyers should contain descriptions of the whole process of due diligence and the appropriate evidence and grounds for the determination and judgment on relevant factual and legal issues.
(2) A law firm and its designated lawyers should, in accordance with the Guidelines for the Legal Opinions on the Registration of Private Fund Managers, express a clear opinion on each of the specific matters, and arrive at a general conclusion on whether the registration application of a private fund manager satisfies the relevant requirements of the AMAC.
(3) The Legal Opinions should be rigorously logical and sufficiently reasoned, and the name of the party referred to and the content of the professional legal opinion issued should be specific and clear. The relevant content of the Legal Opinions should be consistent with the information entered by the applicant in the private fund registration and recordation system, and if any information entered in the system is inconsistent with the due diligence results, a special explanation should be made. A law firm and its designated lawyers should not conceal information in the Legal Opinions, and should ensure that there is no false record, misleading statement, or material omission in the Legal Opinions.
(4) A law firm and its designated lawyers should, as required mutatis mutandis by the Practicing Rules for the Securities Legal Services of Law Firms (for Trial Implementation), obtain appropriate evidentiary materials by rational methods and means according to the actual needs. The due diligence investigation methods that may be adopted by a law firm and its designated lawyers include but are not be limited to the review of written materials, on-site checking, personnel interview, Internet and database search, external interview, and confirmation from justice administrative departments, organizations with public affair functions, and accounting firms. A law firm and its designated lawyers should prepare and preserve relevant due diligence work records and working papers.
(5) The Legal Opinions should include the undertakings made by a law firm and its designated lawyers. Example: In accordance with the Securities Investment Fund Law, the Measures for the Administration of the Securities Legal Services of Law Firms, the Practicing Rules for the Securities Legal Services of Law Firms (for Trial Implementation), and other provisions and based on the facts occurring or existing before the date of issuance of this Legal Opinion, 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. This law firm and its designated lawyers hereby agree that this Legal Opinion is used as an essential legal document for the relevant institution to apply for registration as a private fund manager or for a major modification and is submitted along with other information entered in the private fund registration and recordation system, and are willing to assume the corresponding legal liability.
(6) There should be complete signatures and seals of a law firm and its designated lawyers and clear and definite dates of issuance on the Legal Opinions. The official seal of the law firm should be affixed to both the pages and the edge of pages of the Legal Opinions and the confirmation letter issued by a law firm regarding the “explanation of important information on a private fund manager” in the private fund registration and recordation system, which should also state the names and practicing license numbers of the designated lawyers and be signed by the designated lawyers.
(7) A law firm and its designated lawyers should adhere to their duties, investigate with due diligence the relevant information on a private fund manager or an applicant, and issue the Legal Opinions in accordance with the Guidelines for the Legal Opinions on the Registration of Private Fund Managers in an independent, objective, and impartial manner. The private manager should, as required by the Announcement on Several Matters concerning Further Regulating the Registration of Private Fund Managers, fully cooperate with the work of the law firm and its designated lawyers, and faithfully provide all information and materials needed for the law firm to conduct due diligence.
Question: What qualification requirements should a law firm and its designated lawyers issuing the Legal Opinions satisfy?
Answer: As clarified in the Answers from the Person in Charge of the Asset Management Association of China to Reporters' Questions regarding Implementation (of the Announcement), any law firm legally formed within the territory of China that may provide professional opinions on Chinese legal issues and its lawyers practicing in China may be retained to issue the Legal Opinions according to the requirements of the Guidelines for the Legal Opinions on the Registration of Private Fund Managers.
The AMAC encourages a private fund manager to choose a law firm in compliance with the relevant qualification requirements of the Measures for the Administration of the Securities Legal Services of Law Firms and its practicing lawyers to issue the Legal Opinions.
In accordance with the Articles of Association of the Asset Management Association of China, a law firm as a fund service provider may apply for membership of the AMAC, but a law firm's membership of the AMAC is not mandated by the AMAC.
Question: How do a law firm and its designated lawyers conduct due diligence of the risk management and internal control rules of a private fund manager?
Answer: When a law firm and its designated lawyers conduct due diligence of the applicant's risk management and internal control rules, their checking and verification should include without limitation the following:
(1) Whether the applicant has developed complete risk management and internal control rules involving the key processes of the institution's operation as mentioned in article IV(8) of the Guidelines for the Legal Opinions on the Registration of Private Fund Managers.
(2) Judging whether the relevant risk management and internal control rules comply with the provisions of the Guidelines for the Internal Controls of Private Investment Fund Managers issued by the AMAC.
(3) Evaluating whether the aforesaid rules have the factual basis and conditions for effective implementation. For instance, whether the establishment of relevant rules matches the existing organizational structure and staffing of the institution and satisfies the actual needs for the operation of the institution.
Considering the status quo of the development of the private fund industry of China, in order to support the distinctive and differential development of private fund managers and guarantee the effective implementation of the risk management and internal control rules of private fund managers, the AMAC encourages private fund managers to choose professional outsourcing services provided by private fund outsourcing service providers recorded with the AMAC in light of the actual circumstances of their operations to achieve the objectives of their risk management and internal control rules, reduce their operating costs, and enhance their core competitiveness.