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Shanghai World Union Private Equity, which had previously had its membership revoked by the China Securities Investment Fund Association and its registration suspended for twelve months, has been punished again.

On August 26, the Shanghai Securities Regulatory Bureau disclosed a penalty notice, which showed that Shanghai World Union Equity Investment Management Co., Ltd. (referred to as "Shanghai World Union Private Equity") had violated regulations in the course of conducting private equity fund business, so a warning letter was issued.

Two months ago, the China Securities Investment Fund Association announced seven major violations of Shanghai World Union Private Equity, cancelled the membership of Shanghai World Union Private Equity, publicly condemned it, and suspended the acceptance of its private equity fund product registration for twelve months.

Public information shows that Shanghai World Union Private Equity is a 1-2 billion equity venture capital private equity firm, whose actual controller is Shenzhen World Union Group Co., Ltd. (hereinafter referred to as "World Union"). The firm has 14 funds under management and 4 certified employees. Official introduction shows that it is an asset management company that focuses on real estate investment and is committed to bringing high added value to customers.

Shanghai World Union Private Equity was punished again

Specifically, Shanghai World Union Private Equity violated regulations in the course of conducting its private equity fund business and failed to truthfully disclose to investors fund investments, possible conflicts of interest, and other important information that may affect the legitimate rights and interests of investors.

This behavior violated Article 24 of the Interim Measures for the Supervision and Administration of Private Investment Funds. In accordance with Article 33 of the same law, the Regulatory Bureau took supervisory and administrative measures against the institution by issuing a warning letter.

According to information disclosed by the China Securities Association, Shanghai World Union Private Equity was established on August 20, 2015. The institutional type is a private equity and venture capital fund manager. The legal representative and chairman is Yuan Hongchang, the general manager is Hu Yizi, and the current membership type is an observer member.

In terms of products, Shanghai World Union Private Equity has 14 funds in operation, 5 of which have been liquidated early. According to the reminder information from the China Securities Investment Fund Association, Shanghai World Union Private Equity still has funds that have been in liquidation for a long time (that is, private equity fund managers have private equity funds that have not completed liquidation more than 6 months after submitting for liquidation).

Shanghai World Union Private Equity is an indirect subsidiary of World Union, a listed company on the A-share market. According to the official website, the investment business of the institution focuses on the real estate sector and is committed to providing customers with high value-added services. By deeply exploring the potential of existing real estate assets in core areas and implementing comprehensive and meticulous operational management, the institution has successfully participated in the merger and operation of more than 10 Grade A office buildings and high-end commercial complexes in regions including Shanghai, Zhuhai, Suzhou, and Beijing.

According to public information, World Union Bank and Evergrande Group were previously tied together. World Union Bank's operating income came partly from Evergrande Group, and World Union Bank mainly provided agency sales and "Internet +" services to Evergrande Group. In the fourth quarter of 2021, Evergrande Group defaulted substantially and had problems with its capital chain, which affected World Union Bank. As of the close of August 26, World Union Bank's share price was 1.81 yuan per share, with a total market value of 3.607 billion yuan.

Shanghai World Union Private Equity, a company with a long history of bad deeds

This is not the first time that Shanghai World Union Private Equity has faced penalties for improper information disclosure.

On June 7 this year, the China Securities Investment Fund Association issued a "Disciplinary Action Decision" regarding Shanghai World Union Private Equity, which showed that the institution had committed seven major violations.

The violations are as follows:

(1) Some fund products were not filed: The four institutions of which Shanghai World Union Private Equity served as executive partners were publicly raised, established for investment activities, and managed by private equity fund managers. They were private equity fund products that should be filed, but Shanghai World Union Private Equity did not file the relevant products;

(2) Entrusting an institution without the qualification to engage in fund sales to raise funds: Some of Shanghai World Union’s private equity fund products are sold on behalf of Shenzhen Xincheng Investment Services Co., Ltd., which does not have the qualification to engage in fund sales;

(3) Some private equity fund promotional materials did not comply with regulations: the materials did not include information on private equity fund managers and private equity funds, a summary of investment restrictions, the content, method and frequency of private equity fund information disclosure, etc.; the distribution rules listed in some product promotional materials were inconsistent with the profit distribution clauses in the fund contract;

(4) The classification of investors’ risk tolerance does not meet the requirements: investors of some products managed by Shanghai World Union Private Equity are only classified into three levels: conservative, stable and aggressive;

(5) Failure to disclose information as agreed in the contract: Failure to disclose the quarterly reports of “Union City Renewal No. 3 Private Equity Investment Fund” and “Union Investment Qihang No. 4 Private Equity Investment Fund” as agreed in the contract;

(6) Failure to properly keep fund information: The institution failed to provide suitability materials for multiple investors;

(7) Confusion in office space and personnel: Shanghai Savills Private Equity and Shanghai Yager Investment Management Co., Ltd. shared office space and there was confusion in the appointment of personnel.

After announcing the "seven sins", the China Securities Investment Fund Association, in accordance with relevant regulations, cancelled the membership of Shanghai World Union Private Equity, publicly condemned it, and suspended the acceptance of its private equity fund product registrations for twelve months.

The Shanghai Yager Investment mentioned above seems to have a close relationship with Shanghai World Union Private Equity. Information shows that Hu Yizi, the general manager of Shanghai World Union Private Equity, is the legal representative, chairman and major shareholder of Shanghai Yager Investment with a 51% stake. The two parties also share an office. Among the shareholder background of Shanghai World Union Private Equity, the second largest shareholder is Shanghai Yager Investment, with a shareholding ratio of 33.99%.

As a "good brother" of Shanghai World Union Private Equity, Shanghai Yager Investment also violated the same rules as the former. On June 7, the China Securities Association also announced its punishment for six major violations. Except for the first one mentioned above, the rest of the violations were the same as those of Shanghai World Union Private Equity. Similarly, Shanghai Yager Investment was suspended from accepting the registration of its private equity fund products by the China Securities Association for twelve months.

In addition, relevant personnel of Shanghai World Union Private Equity were also issued a warning letter by the Shenzhen Stock Exchange.

Back in 2017, Shanghai World Union Private Equity and Hu Teng Industrial signed the "Huashe Puhui Building Project Asset Management Consultant Service Agreement", with a cooperation period ending at the end of May 2023. Hu Yizhi served as the legal representative of Hu Teng Industrial, which constituted a related transaction, but the controlling shareholder of the institution, World Union, did not issue a confirmation announcement until August 2022, confirming the existence of a related transaction between the two.

In December 2022, the Shenzhen Stock Exchange issued a "Warning Letter" pointing out that Savills failed to disclose the related-party transaction information with Hu Teng Industrial in a timely manner, and Chairman Hu Jia, then Secretary of the Board Yuan Hongchang and others were primarily responsible.

Shanghai World Union Private Equity Fund Liquidation Postponed

As mentioned earlier, there are private equity funds under Shanghai World Union Private Equity that have not completed liquidation more than 6 months after submitting for liquidation. According to a review by a Cailian reporter, there have been liquidation delays for private equity funds under Shanghai World Union Private Equity.

Data from the China Securities Investment Fund Association shows that "Union City Renewal No. 3" under Shanghai World Union Private Equity was established in August 2019. The project invested in "Union City Renewal No. 3, whose underlying assets are the upgrading, renovation and operation project of the commercial complex at No. 299-311 Yichuan Road, Putuo District, Shanghai". It was supposed to expire on February 7, 2021 and enter the liquidation procedure.

However, due to the sluggish market conditions, the exit of the project was lower than expected. It was first extended for one and a half years in 2021, and in October 2022 it was decided to extend it for a second time for 1-2 years until the assets were successfully realized. Currently, the product is still in operation, and the fund information was last updated in August 2022.