A private fund managed by a billionaire star was exposed for "insider trading in new stocks."
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On the offline IPO subscription stage of the A-share market, subjective long private equity funds with a scale of tens of billions have always been indispensable key players.
But behind every pricing and subscription in this seemingly clear and stable "IPO subscription" operation, how private equity institutions complete internal collaboration, information transmission, and investment decisions is not well understood by outsiders.
Recently, with the disclosure of a disciplinary decision by the China Securities Association, the "real gears" and "operation traces" in the new IPO operation system of a well-known tens-of-billion private equity institution have been exposed.
This document not only points to operational flaws of a star institution but also provides a "panoramic slice" for outsiders to examine potential industry loopholes, clearly presenting those internal links and investment research logic that have long been overlooked…..
A disciplinary decision reveals the "inside story"
Recently, the official website of the China Securities Association published the “Decision on Disciplinary Measures for Shenzhen Linyuan Investment Management Co., Ltd. requiring correction and compliance education.”
This disciplinary decision, for the first time, fully revealed the "inside story" of the offline IPO subscription practices of this tens-of-billion subjective long private equity fund.
"IPO subscription" refers to investors taking part in the initial public offering (IPO) of listed companies. Offline inquiry pricing, as a key step in IPO issuance, is highly valued for its high probability of allocation and professional expertise.
Currently, the main participants in offline IPO subscription are institutional investors (public funds, private funds, broker asset management, insurance capital, etc.), as well as some individuals with high professional capability.
Linyuan Investment is also one of the institutions participating in IPO subscriptions.
Details of the "IPO subscription" by private equity funds
The recently published decision reveals many details about institutions' "IPO subscription":
For example, reading the decision, outsiders can find that institutional offline IPO subscription must follow strict procedures, including but not limited to:
Internal research report writing——internal approval——pricing meeting discussion and minutes——final bidding.
The relevant association examined Linyuan Investment's process for IPO subscription according to these requirements—and indeed found many issues.
“Many issues found”
Several issues were discovered, specifically in the following aspects:
Firstly, regarding Linyuan Investment's "pricing mechanism" for new stocks, the decision states: "(Relevant to IPO subscription) the pricing basis is insufficient. Your company's new stock research report approval mechanism is not properly implemented; in practice, research reports are not approved. The earnings forecasts, valuation analysis, and valuation conclusions in new stock research reports mainly refer to the pricing report by the lead underwriter, and the bidding range is determined by adding a certain percentage above the upper boundary of the underwriter's valuation range."
Secondly, the pricing meeting minutes of this tens-of-billion private equity also exposed flaws. The decision mentions: "The pricing meeting minutes do not adequately support the final bidding outcome; the logic is incomplete and lacks detailed description of valuation parameters."
Both points fall on a critical issue—whether participating private equity institutions have sufficient independent intent and professional capability to price new IPOs.
Why must they be professional and independent?
It may seem that for offline institutions, just placing a bid to get allocation is enough. Why are the authorities so insistent about their research ability and procedures?
The answer is simple: because they bear the "sacred duty" of pricing new IPOs.
As is widely known, the allocation rate in offline IPO subscription is evidently higher than online (for retail investors). The main purpose of this arrangement is not for some institutions to get more allocation, but that professional investors in offline subscription bear the duty of professional pricing and ultimately determining the IPO issue price.
When the market is not sufficiently mature and efficient, it is a convention in developed overseas markets, and a key mechanism in our capital market, for institutions with a certain professional level and risk-bearing ability to participate in bidding and price formation for IPOs.
So, for participants, truly fulfilling this duty is, of course, very important!
Discrepancies between meeting minutes and actual operation
Interestingly, within Linyuan Investment, some meeting minutes recorded doubts or even consensus raised by certain group members, but these "conclusions" differed from the bidding prices submitted:
The decision mentions: "Some group members’ arguments recorded in meeting minutes are inconsistent with their suggested bidding prices; the recommended price range in some pricing meeting minutes differs from the suggested price range in the research report; the proposed subscription price recorded in some project meeting minutes differs from the price submitted to the offline IPO subscription platform."
This is interesting: were the meetings and discussions just a formality, or actually carried out, and were professional opinions in the team fully respected and encouraged? Clearly, the authorities are scrutinizing this aspect.
No "back-testing" of bid objectivity and prudence
The decision further requires the tens-of-billion private equity institution:
"(Company's) compliance management system is not perfect. Your internal policies do not require back-testing the objectivity and prudence of new stock bids, and you did not conduct such back-testing."
This means that even with research reports and pricing meetings, if internal mechanisms to review data and judgments are lacking, penalties may still be imposed.
From another perspective, the decision shows the authorities are truly checking processes, scrutinizing logic, and examining minutes—every focus is solidly on key workflow points.
This is strict oversight for institutions and proper protection for the IPO mechanism and investors' interests.
Private equity institutions must also manage communication equipment
In the compliance management chain for asset management institutions, management of internal staff’s communication devices is crucial—not only for information confidentiality but also for regulatory compliance.
In this regard, the tens-of-billion private equity institution’s "oversight failure" did not escape the attention of regulators:
"Your internal policies do not specify requirements for accessing communication devices during trading hours on inquiry day, nor do they adequately prevent information leakage among personnel who, due to business trips or leave, cannot comply with mobile device management requirements."
"Also, on inquiry day, during trading hours, no measures were taken to control communication devices of researchers and some bidding-aware staff; no records of device access were found, and device management records were incomplete."
This reflects the importance placed by authorities on compliance and investment procedures.
These inspections will clearly impact the industry in the future.
Risk Warning and DisclaimerThe market carries risks; investment requires caution. This article does not constitute personal investment advice and does not take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are applicable to their specific situation. Investment based on this is at your own responsibility. ```