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New rules for VC, PE to limit illegal fundraising

By  Cai Xiao (China Daily)

13:20, December 09, 2011

BEIJING - China issued its first national regulations on Thursday for equity investment in unlisted companies in a move to crack down on illegal fund-raising in the domestic venture capital (VC) and private equity (PE) sectors.

The five-part regulation "signals equity investment in China has started to be institutionalized", according to a statement by the National Development and Reform Commission (NDRC) on its website.

The regulation states that investors should be fully informed of the risks in equity investment and have the financial ability to bear the risks.

The regulation will also strictly enforce existing limits on the number of investors in such projects.

According to NDRC research, 1,059 limited partnership funds illegally raised funds this year, the 21st Century Business Herald reported last month.

According to the newspaper, government authorities in Tianjin said in August that a fraudulent equity investment firm called Huolimu Equity Investment Fund had raised about 1.6 billion yuan ($251.6 million) from more than 5,000 people around China.

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