China's securities watchdog has investigated Zhejiang Ruifengda Asset Management Co., a local hedge fund, over alleged illegal activities. According to Bloomberg, the hedge fund, managing assets exceeding 3 billion yuan ($469 million), has ceased repayments to investors seeking redemptions, while its controlling shareholder remains unaccounted for.
Most investors affected by Zhejiang Ruifengda's actions are institutions, including securities firms. The report further detailed the case of a private fund that attempted to redeem its investment in March but did not receive approximately 33 million yuan, as the client reported.
The situation escalated as economic crime investigators in Shanghai reportedly sealed off the company's office premises.READ
China's New Laws For Hedge Funds
Now, the situation involving Zhejiang Ruifengda is happening as China implements stricter regulations on hedge funds, per Bloomberg. These new regulations, which were announced recently, aim to increase the minimum level of assets that hedge funds must manage to operate legally.
Specifically, they intend to limit hedge funds' use of leverage (borrowed money) and derivatives (financial contracts derived from an underlying asset).
These measures are scheduled to come into effect on August 1. These regulations aim to improve oversight and compliance within the hedge fund industry by removing or discouraging practices deemed risky or non-compliant with regulatory standards.
With that, the China Securities Regulator Commission (CSRC) has acknowledged the gravity of the situation involving Zhejiang Ruifengda Asset Management Co.
The CSRC has taken steps to address the issue by instructing pertinent agencies to comprehensively examine the hedge fund's operations over suspected illegal and irregular activities linked to the fund.
Efforts to reach Ruifengda for comments outside of regular business hours remained unanswered.
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