Multiple private equity firms have become illegal channels for bond issuances, assisting in self-financing or kickbacks. Regulatory authorities collectively take action to punish them.

Bank of China Interdealer Association once again simultaneously disclosed multiple disciplinary announcements, with private equity firms being the focus of the penalties, revealing a series of irregularities in the private placement process of bond issuance. On August 8th, Bank of China Interdealer Association disclosed 5 self-disciplinary measures, with 3 of them targeting private equity firms. According to the self-disciplinary regulations of the interbank bond market, after review by the self-disciplinary meeting, Shanghai Fuxi and Jiangsu Yuning were given a severe warning, while Shanghai Huancai was given a warning. According to the disciplinary announcements, Shanghai Fuxi, as the manager of relevant asset management plans, assisted multiple issuers in non-market issuance through asset management products it managed, and received large financial support or holding service fees. Jiangsu Yuning, as the manager or investment advisor of relevant asset management plans, assisted multiple issuers in non-market issuance and received large financial support. In addition, Shanghai Huancai, as the manager of relevant private equity funds, assisted an issuer in "self-financing" issuance through its managed private equity funds nested with related asset management plans. The aforementioned private equity firms are facing multiple penalties from the "local securities regulatory bureau + China Securities Investment Fund Association + Interdealer Association." According to investigations, Jiangsu Yuning and Shanghai Huancai, subjects of the penalties, were deregistered by the China Securities Investment Fund Association, and Shanghai Fuxi had its product filing suspended for one year. In July of this year, the Interdealer Association penalized 4 institutions and a private equity individual for engaging in or assisting in "self-financing" and "rebate" issuances. From the disciplinary announcements disclosed by the Interdealer Association, the penalized private equity firms generally assisted issuers in non-market issuance through asset management products or nested structures, falling into three main categories: assisting in "self-financing" issuance, participating in "rebate" issuance, and engaging in cross-business violations and conflicts of interest. Some private equity firms had conflicts of interest with businesses and misused fund property. These 3 private equity firms had already been penalized by the local regulatory bureaus and the China Securities Investment Fund Association before being disciplined by the Interdealer Association. In October 2024, the China Securities Investment Fund Association announced the revocation of Shanghai Huancai's registration as a private equity fund manager. Investigations revealed seven violations committed by Shanghai Huancai. These violations included non-compliance with office space requirements, senior management and employees not meeting registration requirements, failure to report significant changes in information, improper retention of investor suitability management materials, failure to fulfill diligent obligations, and non-standardized investor risk assessment. In March 2023, Shanghai Huancai was ordered to correct its actions by the Shanghai Securities Regulatory Bureau and recorded in the securities and futures market integrity file. In October of the same year, the Jiangsu Securities Regulatory Bureau also took administrative supervision measures against Jiangsu Yuning. Jiangsu Yuning, formerly known as Jiangsu Jiaheyuan Asset Management Co., Ltd., officially changed its name in September 2022 and had its registered manager status revoked by the China Securities Investment Fund Association in June 2024. Investigations revealed three major violations by Jiaheyuan: promising to guarantee the investment principal and returns to private equity fund investors, engaging in non-private equity fund-related or conflicting businesses, and providing false information about senior management. Shanghai Fuxi, established in January 2007 and registered in January 2015, with a managed size of 20-50 billion yuan, was also penalized by the China Securities Investment Fund Association in January this year. The association decided to revoke Shanghai Fuxi's membership and suspend the filing of its private equity fund products for 12 months. Shanghai Fuxi's violations included profiting from fund property and engaging in conflicting or unrelated businesses related to private equity fund management. Shanghai Fuxi was previously instructed to correct its actions by the Shanghai Securities Regulatory Bureau in July 2023. Despite denying these violations, the evidence showed that Shanghai Fuxi had arranged for fund subscription and fees in bond issuance, resulting in a conflict of interest. The 5 self-disciplinary measures issued by the Interdealer Association all involved "self-financing" and "rebate" activities. In another case on July 14th, 4 institutions and an individual were penalized by the Interdealer Association for engaging in or assisting in "self-financing" and "rebate" activities, affecting the fairness of bond product issuance. Shanghai Mengsen, as an asset management product manager, assisted an issuer in "rebate" issuance through nested trust products and received large service fees. The association warned Shanghai Mengsen. Shenzhen Qianhai Jiuying, as an asset management product trustee, violated market trading order by holding debt financing instruments for related parties. The association warned Qianhai Jiuying. Shanghai Liangmu Investment, as a product trustee, assisted an issuer in "self-financing" and "rebate" issuance through asset management products, receiving large service fees. The association issued a severe warning to Shanghai Liangmu. Beijing Hengrui Huida signed an agreement with an issuer to assist in "rebate" issuance through related party subscriptions to asset management products, receiving large service fees. The association issued a severe warning to Hengrui Huida. Finally, a private equity fund manager, Zhao Jian, assisted in "self-financing" issuance at the request of the issuer in the bond market and arranged for multiple institutions to "hold" transactions after the debt financing instruments were listed, affecting market trading order. The association warned Zhao Jian. In the case of these 4 institutions, Shanghai Mengsen and Shenzhen Qianhai Jiuying were both registered private equity funds with the China Securities Investment Fund Association. These two securities private equity firms were established in February 2014 and February 2015, with managed sizes ranging from 0-5 billion yuan to 20-50 billion yuan. The Interdealer Association emphasized that in recent years, some market participants have engaged in various non-marketized methods such as "self-financing" and "rebate" in bond issuance, disrupting market issuance order and allowing some entities without bond issuance capabilities to continue to increase their debt levels, leading to the accumulation of credit risks. The association attaches great importance to preventing and combating non-marketized bond issuance behaviors and has issued guidelines and notices to regulate such behaviors. At the same time, the Interdealer Association continues to intensify its efforts in cracking down on non-marketized bond issuance violations, harshly penalizing a series of institutions involved in "self-financing" and "rebate" issuance, and suspending their business for a certain period. In 2024, the association disclosed that it had rigorously dealt with a series of serious violations spanning both primary and secondary markets, including "self-financing + holding," complex "hidden rebates," and disruptions to the issuance order caused by unauthorized bidding, involving issuers and their affiliates, commercial banks, securities companies, trust companies, private equity funds, etc., all of whom received corresponding penalties. This article is adapted from "Caixin," GMTEight Editor: Liu Jiayin.