【Investment risk case 2 - Private Funds Misappropriation of Fund Assets Through Custody Enhancement】

I. Brief introduction to the case

In March 2015, G Securities Company, as a custodian company (hereinafter referred to as “G Company”), signed the “XX Hedge Fund” custody agreement with Y Investment Company, and provided it with multiple copies of Blank fund contract text with official seal for use in the fundraising process. The “hedge fund” investors are mostly relatives, friends or acquaintances of company Y executives and employees. In June of the same year, two investors went to Company G to inquire about the net value of the fund, but were informed by the person in charge of the company that the custodial account agreed in the contract had not received the subscription money from the client.

After negotiation between the two companies, it was found that the original Y company used the method of stealing and replacing the pillars, and replaced the original fundraising custody account page in the fund contract text with the Y company's own bank account page. Obviously, during the process of signing the contract, the investor did not find any abnormality, and made payment to the tampered fundraising account.

Company G immediately reported the case to the public security organ and reported the situation to the local securities regulatory authority. After receiving the clues, the Sichuan Securities Regulatory Bureau quickly sent people to Company G for verification. By retrieving information such as the agreement contract, account capital flow, etc., and tracking the flow of funds layer by layer by comparing the contract and layer by layer, it was confirmed that Company Y had indeed tampered with the contract custody account as its own. Bank accounts, and illegally transferred 5.8 million yuan of customer investment funds to the bank accounts of company executives and related natural persons for other purposes. According to D, the spouse of the general manager (responsible for managing the company's bank account and official seal), the misappropriated funds were used for private lending. Under the continuous high pressure of supervision, Company Y finally returned all the investment funds of 5.8 million yuan to investors, and returned all the text of the fund contract to Company G, and the potential risks of this incident were eliminated.

Article 23 of the "Interim Measures for the Supervision and Administration of Private Investment Funds" (hereinafter referred to as the "Private Equity Measures") stipulates that private equity fund managers, private equity fund custodians, private equity fund sales agencies and other private equity service agencies and their practitioners engage in private equity funds. business, and shall not embezzle or misappropriate fund property. Accordingly, the Sichuan Securities Regulatory Bureau dealt with Company Y's tampering with the fundraising custody account and misappropriation of customer investment funds.

Ⅱ. Case study

At present, the China Securities Regulatory Commission does not have administrative licenses or license management for private equity fund business. After the private equity institution has registered with the industry and commerce, according to the requirements of the Private Equity Measures, the private equity fund business can only be carried out after the fund industry association completes the registration procedures as a private equity fund manager. Since the fund industry association started the registration and filing work in 2014, the number of private equity fund managers in my country has exceeded 17,000, but the integrity, normative awareness and business capabilities of fund managers are uneven, and there are even criminals in troubled waters. Under the guise of engaging in illegal fundraising, financial fraud and other illegal and criminal activities.

This case is a typical case of illegal misappropriation of fund property in the field of private equity funds, and has the following characteristics:

1. With the help of “fund assets are managed by securities companies”, defrauding investors' trust. In practice, some private equity fund managers sign custody agreements with banks or securities companies and other institutions to deposit the raised fund properties in a special custody account. monitor the situation. Entrusting the fund property to a third-party institution is an important means to ensure the independence and safety of the fund property, which can increase investors' trust in the fund manager to a certain extent. Company Y took advantage of this and obtained a blank fund contract with the official seal of the securities company by taking advantage of the custody cooperation with a well-known domestic securities company. claims to defraud investors.

2. Use the concept of “hedge fund” to confuse and attract investors. Hedge funds mainly refer to funds that adopt hedging trading strategies, which have the characteristics of wide investment targets, flexible investment operations, good liquidity of investment assets, and high investor threshold requirements. The development of hedge funds in China started relatively late, and for the majority of investors, “hedge funds” is still a strange and mysterious concept. Company Y took advantage of the lack of understanding of hedge funds by domestic investors and used the “hedge fund” concept “package” products that looked “tall” Confuse and attract investors.

3. Taking advantage of loopholes in the signing of private equity fund contracts to misappropriate fund properties. Since investors, private equity fund managers and custodians are often not in the same place, the usual practice for the three parties to sign a fund contract is as follows: the custodian first delivers the blank fund contract text with its own official seal to the private equity fund manager. The person and the private equity fund manager sign and then return one copy to the custodian. There is a time and space disconnection between the three parties in the contract signing, that is, the three parties are not present at the same time to sign the contract, and the investor and the custodian do not meet. At the same time, according to the contract, after the private equity institution completes the fundraising, it returns the tripartite contract to the custodian, and the custodian's custodian responsibility takes effect. Since it takes a certain period to complete the fundraising, the custodian does not know whether the contract is signed and fundraising is realized and how much the fundraising is during this period. In this case, Company Y took full advantage of the loopholes in this common practice, the information asymmetry of the custodian and the time difference from the signing of the custodian agreement to the successful fundraising, tampering with the content of the contract without authorization, and signed the so-called so-called contract with unwitting investors. The “tripartite agreement”, and boldly misappropriation of fund assets.

4. Use acquaintances to paralyze investors. The investors involved in this case are mostly relatives, friends or acquaintances of the executives and employees of Company Y. Based on the trust between relatives and friends, investors generally do not carefully check the formatted fund contract when signing the contract, and naturally it is difficult to find the abnormality of the contract.

Ⅲ. case inspiration

For investors, private equity fund investment should be selected carefully, and private equity fund management institutions and custodian institutions should be paid continuous attention and supervision after the investment.

1. Do what you can. Private equity fund investment has the characteristics of high risk, and requires high risk identification ability and risk tolerance ability of investors. The "Private Equity Measures" also clearly stipulates the requirements for qualified investors of private equity funds, in addition to the investment amount of a single private equity fund not less than 1 million yuan, the net assets of the unit should not be less than 10 million yuan, and the personal financial assets should not be less than 3 million yuan or The average annual personal income in the past three years is not less than 500,000 yuan. Investors should proceed from their own actual situation, do what they can, and judge whether they can invest in private equity fund products according to the standards of qualified investors of private equity funds. On the premise of meeting the criteria for qualified investors, choose products that match your risk tolerance.

2, to find out the details. Before purchasing private equity fund products, investors can inquire through the website of the AMAC or ask the Securities Regulatory Bureau where the institution is registered to find out whether the institution has been registered with the AMAC, whether the registration information is complete, and whether it is consistent with the industrial and commercial registration information. At the same time, you can also learn more about the private equity fund managers' past performance, market reputation, and integrity standards.

3. Look carefully at the contract. The fund contract is an important document that stipulates the rights and obligations between investors and private equity fund managers. When looking at the contract, investors should pay attention to whether the rights and obligations stipulated in the contract are reasonable, whether the contract is complete, whether there are any abnormal situations such as missing pages and pages, and should read the terms carefully. Explain or explain, do not be fooled or deceived by all kinds of exaggeration and false propaganda. For contracts in multiple copies, it should also be checked whether the content of each contract is completely consistent.

4, to continue to pay attention. After subscribing for private equity fund products, investors should continue to pay attention to the investment and operation of private equity fund products, and require private equity fund managers to perform information disclosure obligations as agreed. If investors find that the manager has lost contact, the fund property has been embezzled or misappropriated, or the fund has major risks, etc., they should report to the securities regulatory bureau or fund industry association where the private fund manager is registered in a timely manner. If there are criminal clues such as fundraising, it is necessary to report the case to the public security and judicial organs in a timely manner.