Quantify Audit Thresholds, Penetrate Underlying Assets, Private Placement Disclosure Bids Farewell to "Gray Area"

March 13, 2026, Afternoon, the China Securities Investment Fund Industry Association issued a notice seeking public comments on the “Implementation Rules for Private Equity Fund Information Disclosure (Draft for Comments)” (hereinafter referred to as the “Rules”) and the “Template for Key Content of Private Equity Fund Information Disclosure (Draft for Comments)”.

These supporting rules, aligned with the China Securities Regulatory Commission’s “Supervision and Administration Measures for Private Fund Information Disclosure,” address industry pain points through quantitative indicators, transparency requirements, and standardized templates.

The most notable feature of the new regulations is the transformation of vague requirements into actionable, verifiable quantitative standards, with the audit threshold’s “hard constraints” being particularly representative.

Regarding private securities funds, Article 22 of the Rules establishes six mandatory audit scenarios: if the proportion of illiquid assets and New Third Board stocks at any quarter-end exceeds 60% of net assets; if the value of off-exchange derivatives contracts exceeds 60% of net assets; if the proportion of overseas investments exceeds 60%, among others, triggering mandatory audits.

For private equity funds, the Rules require that private equity funds with a scale exceeding 100 million yuan and more than 20 individual investors, as well as other circumstances stipulated by the China Securities Regulatory Commission, have their annual financial reports audited by an accounting firm compliant with the Securities Law, removing the previous vague language of “large management scale and many individual investors.”

Building on this, the new policy mandates private funds to disclose information in a transparent, “piercing” manner. Previously, private funds often involved multi-layer nested investments, where investors could only see the net asset value at the surface level and were unaware of the underlying asset investments. Many current financial disputes stem from underlying asset failures, leading to significant fund losses.

Articles 11 and 12 of the Rules require private securities funds investing in other private funds or legally issued asset management products (excluding publicly offered securities investment funds) to disclose not only direct investment details but also the combined, consolidated asset categories, amounts, and investment paths after piercing through the layers.

For equity products invested in other private funds, Article 29 further requires disclosure of the top ten investments by proportion of the fund’s net asset value after piercing, including but not limited to investment project names, total investment costs, amounts recovered, book values, and investment paths.

This means that regardless of the number of nested layers, the risks of underlying assets will be exposed to investors, and fund managers can no longer evade disclosure responsibilities by citing complex structures.

Regarding private funds obtaining net value flexibility through high-yield bonds, the Rules specify that if investments in the same bonds exceed 10% of the fund’s net assets, or investments in other assets of the same type exceed 25%, detailed information about these investments must be disclosed.

Additionally, the Rules require disclosure of fund leverage levels and related-party transactions.

Standardizing the liquidation process is an important measure to protect investors’ “last mile” rights. Article 39 clearly states that if a fund anticipates it cannot complete liquidation within the agreed period, the manager must issue a temporary disclosure before the original deadline; the obligation for periodic and interim reports continues until liquidation is completed.

Finally, the Rules require private funds to clarify their information disclosure procedures. According to Article 42, fund managers should back up the disclosed information on the designated information disclosure backup platform of the China Securities Regulatory Commission, allowing investors to access information through this platform. The backup platform is not an information disclosure channel; only information stored there counts as disclosure. If information is not disclosed through other channels, it cannot be considered as properly disclosed to investors.