On October 27, under the guidance of CSRC, SZSE issued the Guidelines for Public Offering of Infrastructure Real Estate Investment Trusts (REITs) Business No. 5 - Interim Report (for Trial Implementation) (hereinafter referred to as the “Guidelines”). This is a specific measure taken by SZSE to implement the requirements of the Notice on Further Promoting the Normal Issuance of Real Estate Investment Trusts (REITs) in the Field of Infrastructure issued by CSRC. It is conducive to further improving the construction of the duration rule system for infrastructure REITs with “asset management” as the core, constantly enhancing the timeliness, effectiveness and standardization of information disclosure, and effectively urging market participants of infrastructure REITs to return to their positions and fulfill their responsibilities.
With “asset management” as the core, the Guidelines is aimed to build an information disclosure system in line with the characteristics and laws of REITs. It focuses on improving the regulatory norms on matters relating to performance, standardized operation and operation of underlying assets of REITs.
Specifying the Obligations and Special Disclosure Requirements of Responsible Parties to Promote Effective Implementation of Disclosure Responsibilities by the Relevant Parties
On the basis of improving the basic requirements for information disclosure of infrastructure REITs, the Guidelines clarifies the obligations and special disclosure requirements of all parties and further promotes the effective implementation of information disclosure responsibilities by relevant entities. Firstly, it stipulates the development of an information disclosure management system by fund managers, an information disclosure cooperation system by operation management institutions, and the respective designation of senior officers as the persons in charge of information disclosure. Secondly, it details the scope of responsible parties performing the obligation of information disclosure to urge the relevant parties to provide relevant information for the information disclosure obligors in a timely manner and ensure the authenticity, accuracy and completeness of the information provided. Thirdly, it clarifies the requirements for voluntary disclosure and exemption from disclosure. According to the Guidelines, information disclosure obligors can voluntarily disclose information related to investors’ value judgments and investment decisions and independently improve the quality of information disclosure services. The Guidelines also allows exemption from disclosure when the disclosure involves state secrets, permanent business secrets or commercially sensitive information and meets certain conditions.
Detailing Disclosure Requirements for Infrastructure Projects to Highlight the Feature of Look-through Regulation
After taking full account of the characteristic that the income of infrastructure REITs mainly comes from infrastructure projects, the Guidelines details disclosure requirements for the operation of infrastructure projects to strengthen the look-through regulation. Firstly, it standardizes the disclosure of information on the operation of infrastructure projects in a multi-dimensional manner, with a focus on the production and operation status of infrastructure projects, stability of cash flow and its source, change in the subject qualification of project companies and stability of operation management institutions. Secondly, it further promotes the effective implementation of the primary responsibility by operation management institutions. According to the Guidelines, operation management institutions shall continue to pay attention to the operation of project assets and confirm the disclosure. In case of any dissent to the disclosure in the interim report, operation management institutions shall inform fund managers who shall disclose the objection and reasons therefor in the interim report. Thirdly, it sets unified disclosure standards for key operating indicators by the type of underlying assets to enhance the comparability of the operation of underlying assets.
Improving Operation Management Responsibilities and Standardize Disclosure at the Fund Level
The Guidelines regulates the information disclosure at the fund level from such aspects as fund transactions, finance and governance, to urge fund managers to earnestly perform their product management responsibilities. Firstly, it specifies disclosure requirements for specific fund operation matters, including transaction matters, financial matters and governance matters. Among them, transaction matters include fund transactions, purchases or sales of infrastructure projects and major related transactions. Financial matters include new external loans, financial leverage exceeding the prescribed proportion, losses and evaluation of infrastructure projects. Governance matters include major litigation and arbitration, public opinion clarification, changes in business participants, and changes in important personnel or their inability to perform duties. Secondly, based on the practical experience of the pilot program, it sets forth the standards for the situation under which information disclosure and suspension and resumption of trading are triggered by price fluctuations in the secondary market, to protect investors’ right to know and maintain smooth trading in the secondary market.
Next, SZSE will, in accordance with the deployments and requirements of CSRC, adhere to paying equal attention to standardization and development and continue to effectively regulate the information disclosure of listed REITs. We will strive to build a market ecology featuring interaction and mutual trust of investment and financing, promote the high-quality development of the REITs market and better serve the national strategy and the overall economic and social development.
