Conflict Of The Interests And Coordination In Privately Offered Fund Investments

"Privately Offered Fund" is a concept that is only widely used in China. However, because there is no clear definition in relevant official documents in China, together with the variety forms of private fund, this concept is misused and abused. Tracing the origin of Privately Offered Fund, it is essentially an investment collection which is based on the provisions of regulatory exemption and with a high degree of operational flexibility. The basis of its fund-raising is the reliable relationships between the investors and the fund manager.In the operation of Privately Offered Fund, fund manager have the direct control of funds based on the trust of investors. They use the funds to invest and faithfully fulfill their obligations, aiming at maximizing the interests of investors. However, the principal-agency relation between the two has intrinsically unavoidable defects, that is, the conflict of interests between the two sides, especially when the manager of Privately Offered Fund is a securities company who has universal operation. The complex relationship of interests among different departments of the securities company usually will lead to unfair distribution and thus undermine the interests of the investors.How can we coordinate the conflict of interests of Privately Offered Fund is the core of this thesis. The fundamental advantage of the private equity fund lies in its flexibility of operation, and when coordinating the conflict of interests we cannot cost its flexibility. Therefore, most countries prefer the regulation which leads to improve its structure of organization, and make strengthening its internal self-constraint as the main body and external regulatory as a supplement. It is commonly believed that the form of limited partnership can effectively prevent the conflicts of interests. However, for the Privately Offered Fund forms hold by comprehensive securities operating companies, such as direct investment of the securities company funds, the best way to prevent conflicts of interest is creating effective system of Information isolated wall within securities company. Making clearing the concept of Privately Offered Fund as the starting point ,this article will analyze the performance and nature of the conflict of interests in Privately Offered Fund, and focus on discussing the significant role that the limited partnership and the information isolated wall played in coordinating the conflict of interests.