First, from a legal perspective, public offerings have relatively sound laws - the Securities Investment Fund Law and various management measures of the China Securities Regulatory Commission. However, private placements currently do not have corresponding legal regulations. They currently rely on the Partnership Enterprise Law (for Preparing for private placement of limited partnership, this law has not yet been implemented), "Trust Law" (trust provides a legal way for private placement, which is a unique form of private placement funds in my country), "Contract Law" (this is the main form of contractual private placement legal basis).

When the Securities Investment Fund Law was initially formulated, private equity funds were not targeted for adjustment. This was a pity.

For private equity funds, although their investments are flexible and should not be subject to detailed supervision, the most basic access qualifications should be met. In order to prevent moral hazard, fund companies should have minimum capital limits when they are established, and risk reserves should be set aside.

In addition, the threshold for investors should also be limited. Our country has always regarded stability as the overall situation. If investors are not rational enough and invest most of their wealth in risky fund types, the instability caused can be imagined.

We can refer to foreign legislation and current capital trust laws to set minimum thresholds and limit the proportion of investment in household assets to effectively educate investors.

Second, from a regulatory perspective, public offerings are supervised by the China Securities Regulatory Commission.

The China Securities Regulatory Commission inspects fund companies regularly and irregularly, including document inspections and on-site inspections. The scope of the China Securities Regulatory Commission's inspections includes fund companies, their senior managers, and fund establishment, sales, and investment.

As for private equity, there is currently no supervision. For the China Securities Regulatory Commission, private equity funds are only regulated as ordinary institutional investors or even natural person investors. As long as they want to evade this supervision, there are ways.

The flexibility of private equity is the biggest advantage, but proper supervision is necessary. Any flexibility that disrupts the market and manipulates stock prices is illegal.

In addition to government supervision, public funds also implement industry self-discipline. The Securities Industry Association has rules and regulations for member management and provides training as needed to improve management and investment levels and enhance legal understanding.

In short, public equity has its own organization, while private equity does not.

Public offerings require mandatory information disclosure, while private placements require disclosure by agreement between the fund company and investors.

The disclosure content, disclosure cycle, and disclosure matters are all stipulated in the agreement, and private equity does not have mandatory disclosure obligations.

Public placement requires fund custody and the funds must be handed over to a third party (bank) for custody, while private placement does not have fund custody except in the form of trust, which also leads to greater private placement risks.

Third, in terms of investment restrictions, public offerings have strict investment restrictions. In terms of investment types, investment proportions, matching of investment and fund types, and the proportion of all funds under a fund company investing in a listed security, even in order to prevent the transfer of interests,

Funds under the same fund company are not allowed to buy and sell the same security on the same day.

In terms of investment types, private equity funds are not limited to domestic securities, but may also involve futures, gold, foreign exchange, and foreign securities, futures, etc., which are much broader than public funds, and investment restrictions are completely stipulated in the agreement.

Even in the operation of domestic securities, there are no strict restrictions required by public funds, and it is difficult to regulate.

For example, if trust plans are set up in multiple trust companies, the most standardized trust method at present, trust private equity funds, one plan may sell a certain stock and another plan may buy the stock. If the amount of funds is large enough, it will lead to

Manipulate stock prices.

As for contract-type private equity funds, because they are not in the name of the fund company's account, the investment accounts for the proportion of one stock, which is difficult to supervise and may also lead to manipulation of stock prices.

Fourth, there are no clear legal provisions on public offerings and private placements in terms of fundraising methods. my country’s Securities Law stipulates the concept of public issuance of securities: “A public offering is deemed to be a public offering if one of the following circumstances occurs: (1) Issuance to unspecified objects Securities; (2) The total number of securities issued to specific targets exceeds 200; (3) Other issuance activities stipulated by laws and administrative regulations. "If private placement is understood to mean that the total number of investors does not exceed 200 or not to unspecified targets. Fundraising, then, the legal changes on capital trusts are contradictory to this. In the past, the number of investors in a capital trust plan was limited to 200 people, but now there is no limit on the number of institutions.

Of course, this is to encourage mature investors and is an improvement in management. However, the legal inconsistency means that there are no strict boundaries between public and private placements.

One thing that is certain about private placement is that it must not be promoted through radio, television, newspapers and other public media, otherwise it will constitute a public offering.

Fifth, in terms of taxation, public offerings have clear national tax standards and relatively standardized management, while private placements are difficult to supervise due to various legal forms and various means of tax avoidance and even tax evasion.

Sixth, performance remuneration of funds Public funds do not draw performance remuneration, only management fees.

(Even so, the pot is already full.) Private equity funds must charge performance compensation. Most of them do not charge management fees. Some collect management fees in advance and then deduct them from the performance compensation.

For public fund managers, performance is used for ranking, while for private fund managers, performance is a real share, which is direct income.