Private fund firms include those non-retail focused private securities funds, private equity funds as well as venture capital funds.
The regulator said it has inspected 305 private fund managers with 2,462 funds totalling RMB 900bn ($135.6bn, £103.2bn, €119.6bn) in assets under management, according to a statement on the CSRC website. Together they represented 14% of the domestic industry.
“The inspection focused on five areas, including financing, asset safety, information disclosure, leverage and the extent to which investors’ interest are harmed,” CSRC said.
Four firms were suspected of illegal financing activities, while six were found to violate the rules by wrongfully handling the money, and another 65 firms had problems disclosing information properly, the regulator said.
They include two firms in Beijing, five from Shenzhen and six from Shanghai.
The administrative supervision measures could include inquiries, warning letters or suspending the performance of duties.
Meanwhile, five more companies were added to the “lost contact” list by the Asset Management Industry Association of China, which is a list of Chinese asset managers it is no longer able to contact.
China’s regulators hope to weed out the unsustainable fund houses, many of which popped up during the rise in the domestic stock market last year.
There are 16,467 private fund firms as of July this year, down by about half (7,627) from a month ago, according to the AMAC data. Still, assets under management of the total number of funds (36,829) reached RMB 7.47trn last month, up from RMB 6.93trn in June.
A similar crackdown is also occuring in the wealth management industry, but Noah Holdings believes it will create a more robust industry in the long run.