Newsletter summary
Ruifengda's asset volume flight incident triggered the ability to perform its duties to the trustee.BlockchainingameThe query involves the custody of 70 private equity products, and more than half of the custodians are China Merchants Securities. The responsibility boundary of the custodian has become the focus, and it is necessary to protect the rights and interests of investors and avoid risks. The regulators have taken strict measures to supervise and control the illegal phenomena of private placement.
Text of news flash
[Ruifengda asset flight incident triggered trusteeship responsibility discussion on investor rights and interests protection] recently, Ruifengda asset volume flight incident continues to ferment, causing the market to question the ability of private equity custodians to perform their duties. According to CICC information, Ruifengda filed a total of 70 private equity products, of which 68 are still in operation, involving custodians including Citic Securities (600030), Huatai Securities (601688), China Merchants Securities (600999) and so on. Investors question the ability of the custodian to perform his duties, including how the funds are transferred, whether the custodian has committed dereliction of duty, and whether the custodian should be liable for compensation. It is very important to clarify the rights and responsibilities of the trustee, which is not only related to the exertion of the fund trusteeship function, but also to the safety of the residents' fund property, but also to the capital management industry how to keep the "lifeline" of credibility. The custodian shall be responsible for the safe custody of the fund assets, truthfully disclose information, review the information disclosed by the fund manager, supervise the investment operation of the fund, and so on. However, there are often deviations and flaws in the actual operation. Some private equity managers transfer trusteeship funds by means of multi-layer nesting and the use of the new third board market to run away. Ruifengda's operation methods of transferring funds include multi-layer nesting, investing in a number of private equity, taking advantage of the new third board market, and so on. Investors question whether the custodian knows where the underlying assets are invested and whether he has done his best to protect the rights and interests of investors to prompt risk obligations. At present, there are still many disputes in the legal profession about whether the custodian should be jointly and severally liable and to what extent the custodian should bear the liability. There is a view that the relevant custodian should bear an important responsibility to restrain the fund manager; there is also a view that the duties of the custodian should be strictly limited to the scope agreed in the escrow contract. In judicial practice, there have been cases in which the fund custodian has been sentenced to joint and several liability. For example, a private equity product in Hengyu Tianze exploded, and the custodian, China Merchants Securities, was ordered to bear 10% supplementary compensation liability for failing to fully perform its duty of review and supervision of the investment target. Guohao law firm Wan Zhiyao said that in the case of fund managers "missing" and "running away" frequently, performing their duties in accordance with the contract may not fully protect the interests of investors, nor is it conducive to the stable development of the private equity industry. Legislative and regulatory authorities should find a balance between protecting the rights and interests of investors and not unduly increasing the responsibilities of the custodian. From a rational point of view, the occurrence of a risk event is often the result of the joint action of a variety of internal and external factors, and the responsibility can not be simply attributed to a participant. Only by further clarifying the responsibilities and obligations of all parties of private equity funds, can it be more beneficial for all parties to clarify their obligations and fulfill their duties. Ruifengda asset flight incident proposed to the fund custodianBlockchainingameIt is not only a warning, but also a wake-up call for the standardized operation of the entire private equity industry. Custodian institutions must make great efforts in risk management and standardized operation to ensure the compliant operation of the fund and protect the interests of investors. From the perspective of supervision, it is a general trend to rectify the illegal phenomenon of private placement and strengthen the strict supervision and control of the trusteeship business. In January 2022, regulators reported that there were three major risk points in the securities trusteeship business, requiring a careful assessment of whether to accept the entrustment, and in principle "can not see clearly, do not develop the industry". Industry insiders said that in order to avoid the joint and several risks of trusteeship, access standards must be strictly controlled. Before carrying out trusteeship business, trusteeship institutions should first confirm whether the qualifications of the clients meet the requirements, whether the products are established in accordance with the law and the risks are controllable, and then accept the entrustment. For custodians, eliminating risks from the source is the key to preventing the next avalanche.
