Aladdin’s Ride: High Hopes, Low Returns, and the Elusive GTR Dream
Once upon a modern day, Aladdin found himself pining not for a magic carpet, but for the rubber-burning, engine-growling glory of a sports car. The Toyota Camry parked in his driveway might as well have been a camel in his eyes – reliable, sure, but it wasn’t going to win any races or turn heads down at the marketplace. No, what Aladdin yearned for was a GTR, a sleek chariot of speed that had haunted his dreams since his foot could reach a pedal.
But alas, his piggy bank was on a diet, stubbornly refusing to plump up to GTR-buying proportions. Bonds and mutual funds? They might as well have been offering magic beans with their measly 3% interest. Our friend needed a financial magic lamp, and he needed it fast.
Enter the salesperson, a genie of the showroom floor, who could see the dollar signs in Aladdin’s eyes. With a flourish and a promise of treasure beyond imagination, they unveiled the Private Equity Fund – a cave of wonders that was about to launch a new project promising a shiny 15% return. And for the cautious, a safety net: a 4% minimum yield plus the return of his capital if the project belly-flopped.
Hook, line and sinker, Aladdin threw in his life savings of 500,000 RMB. In his mind, the GTR was already purring in his driveway. Fast forward one year, and it was time to cash in the chips. But the pot of gold at the end of this rainbow had vanished; the company had not only missed the mark on profits but had also done a magic trick on half his capital.
“High risk, high return, mate! Did you really think we had a money tree out back?” they quipped, as Aladdin learned a lesson that not all genies have your best interests at heart.
Now, our would-be GTR driver wonders if he can salvage even the crumbs of his dream. Will Aladdin be left holding the steering wheel of an invisible sports car, or is there a chance he could rub the lamp again and see his capital return?
Law In A Minute
Certainly, Aladdin is entitled to the return of his capital along with the 4% interest that was promised.
Typically, the threshold for private placement investments is set at a minimum of 1 million RMB. Consequently, Aladdin’s investment of 500,000 RMB doesn’t meet the criteria for a private placement according to legal definitions. Instead, this transaction would be classified as private lending in a legal context, where the borrower is mandated to repay the principal amount plus any agreed interest to the lender.
Furthermore, the fund management company transgressed legal boundaries by assuring Aladdin of both his capital and a minimum return on his investment. The truth in the world of finance is that there are no high-return, low-risk products. While the company is permitted to support their claims with evidence to convince Aladdin to invest in their product, they are not legally allowed to guarantee the return of his capital.
Legal Basis
Securities Investment Fund Law
Article 103
A fund investment adviser and its employees shall provide fund investment advice services on a rational basis and make truthful statements on its service ability and business performance and shall not promise or guarantee investment returns in any form or infringe upon the lawful rights and interests of the clients.
Interim Measures for the Supervision and Administration of Privately Offered Investment Funds
Article 12
A qualified investor of a private fund shall be an entity or individual that has the corresponding risk identification ability and risk tolerance, invests not less than 1 million yuan in a single private fund, and meeting the following relevant criteria:
(1) An entity with net assets of not less than 10 million yuan.
(2) An individual with financial assets of not less than 3 million yuan or with average annual income in the last three years of not less than 500,000 yuan.
The term “financial assets” as mentioned in the preceding paragraph includes but is not limited to bank deposits, stocks, bonds, fund shares, asset management plans, financial products of banks, trust plans, insurance products, and futures equity.
Article 15
A private fund manager or distributor may not promise any principal guarantee or minimum return to investors.