Private Placement Proxy “Maze”: 150,000 Yuan “Friendship Investment” Breached Net Asset Value
It is not unusual for private fund employees to buy their own company's products.
According to industry rules, internal personnel at private fund institutions participating in their own fund investments are often not subject to the minimum investment threshold of one million yuan.
This is originally an internal arrangement to bind employees’ interests to the products.
However, this “internal channel” is sometimes quietly extended.
When external friends, classmates, or acquaintances are unable to directly participate in private fund products due to investment thresholds or qualification issues, having internal staff apply for and nominally hold investments on their behalf is not an unfamiliar practice.
Often, it does not appear as “illegal,” but rather wears a cloak of trust, relationships, and helpfulness, regarded as a private convenience.
The real problem is, once money enters the product this way, many things depend solely on relationships for guarantees.
Whose name is on it, who holds the information, who makes the decisions—when things go well, no one cares.
But as soon as the market turns sour, these details that were barely discussed quickly become sources of conflict.
Recently, a dispute between a private fund employee and an alum has exposed the potential legal risks and personal conflicts involved in such “internal channel” operations.
Casual Alumni Chat Leads to a Private Fund “Follow Investment”
The two parties in this dispute did not meet through investment.
They became acquainted early on through their alumni connection and pursued separate careers after graduation. One, Shao, works at a private fund institution in Shenzhen. This fund is not a major firm and currently manages between 500 million to 1 billion yuan.
The other, Han, works in the legal field in Shenzhen and is an alum of Shao.
In early November 2021, the two chatted on WeChat about wealth management. Han mentioned that when buying financial products through a bank channel before, she was notified by the system that she could not proceed due to failing the risk assessment questionnaire.
At this point, Shao, the private fund employee, naturally noted that private funds have purchase thresholds and not everyone can participate directly.
Next, Shao mentioned that he planned to subscribe to his company’s managed private fund.
This remark shifted the direction of the conversation.
With this background, Han started to ask more specific questions and inquired how much Shao was going to invest. Shao replied he would invest his spare cash, about tens of thousands of yuan, and further explained that as an internal employee, participation in their own managed fund does not require meeting the usual one-million-yuan minimum.
That afternoon, Han made a decision: she transferred 150,000 yuan to Shao, entrusting him to subscribe to the private fund on her behalf.
A private fund “follow investment” originating from an alumni relationship thus began.
Subscription Made in the Name of an “Insider”
After Han (the external investor) transferred 150,000 yuan into Shao’s (the private fund employee concerned) personal account, the subscription process was handled by Shao.
Unlike ordinary investors, these funds did not enter the fund account under Han’s name but were merged into Shao’s personal investment plan.
The day after the transfer, Shao, as investor, created a subscription order in the system for the private fund in question, with a subscription amount of 300,000 yuan.
The next day, he transferred 300,000 yuan into the fund’s account.
In other words, of this 300,000 yuan, half came from Han, the alum, and the other half was Shao’s own money.
In form, this was a standard private fund subscription.
Fund contract, fundraising account, subscription procedures—all followed private fund operation rules. The only difference was: the registered holder of the fund units was just one name—Shao, the private fund employee.
A “Risky” Investment
This arrangement did not seem unusual at the time.
As an internal employee, Shao was qualified to invest in the fund, not limited by the usual minimum, and the fund system naturally only recognized his individual identity.
For Han, the external investor, she chose to entrust the funds to Shao for a unified subscription, not direct participation, out of alumni trust and relationship.
Under this structure, the fund-level investor was a single “insider”, but in reality, there were two contributors.
This arrangement based on trust worked smoothly in the subscription phase, but it also meant that from the date of fund confirmation, all unit information, net value queries, and redemption operations could only be executed by the nominal holder—Shao.
A “Failing” Net Value Curve
The subscription confirmation date for this “two-person investment” private fund was November 12, 2021.
From then, the fund officially entered operation.
According to private fund disclosure rules, the manager periodically discloses net value and relevant reports to investors, but at the fund level, the only recognized investor was Shao. All access and disclosure permissions were in his name.
During the holding period, the fund’s net value kept fluctuating, generally in a downward trend.
By February 10, 2023, the fund’s unit net value had dropped from 2.846 at subscription to 1.614, a loss of nearly 40%.
After that, the fund continued its decline. In July 2023, Shao replied to an inquiry that the net value “was cut in half.”
By December 2023, the net value had further dropped to 1.191.
Facing mounting losses, whether to redeem became a topic of repeated discussion between the two.
Since the fund units were registered under Shao’s name, only he could initiate redemption. On January 12, 2024, Shao formally submitted a redemption application.
On January 16, 2024, the redemption funds were received.
In the end, Han’s 150,000 yuan investment resulted in an actual loss of 94,342.94 yuan. This private “follow investment” that lasted over two years thus became a dispute.
Investors familiar with A-shares may notice that the subscription occurred in November 2021 and redemption was in January 2024, both during periods when the overall A-share market was in a shaky, declining trend and indexes were at relatively low levels. In hindsight, the buy and sell timing was not ideal.
Court Judgment
After carefully reading the full judgment document, the court confirmed a key point:
Han and Shao had an entrusted wealth management contractual relationship.
Even though the two did not sign a formal written contract, their actions—transfer, subscription on behalf, redemption, and returning funds—constituted de facto entrusted wealth management.
The court also clearly pointed out: Shao, as an employee of the private fund, knowingly accepted Han’s commission even when aware that Han was a conservative investor, did not evaluate her risk identification or bearing ability, did not fully disclose the risks of the fund, or exercise prudent management responsibility; moreover, Shao accepted Han’s commission for an amount below the 1 million yuan minimum, subscribing on her behalf with his own qualification, and thus, Shao was seriously negligent.
In parallel, the court ruled that Han, as a fully capable civil actor, willingly transferred funds to Shao to invest, knowing she was not qualified for direct subscription and that her risk tolerance and the product’s nature didn’t match; thus, Han also bore responsibility for the losses.
The court ultimately ordered Shao to bear 30% of the loss compensation, amounting to 28,303 yuan, with Han responsible for the rest.
The second-instance court upheld the original ruling.
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