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On October 27, 2023, under the guidance of the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange (SSE) released the Guidelines No. 5 for the Application of Rules on Publicly Offered Infrastructure Real Estate Investment Trusts (REITs) - Interim Report (Trial) (hereinafter referred to as the Guidelines for Interim Report). As a specific measure implemented by the SSE to comply with the CSRC's Notice on Further Promoting the Normalized Issuance of Infrastructure Real Estate Investment Trusts (REITs) Funds, this release aims to further enhance the existing rule system for REITs with a focus on regulating assets. By improving the timeliness, effectiveness, and standardization of information disclosure, the guidelines effectively urge market participants of infrastructure REITs to fulfill their responsibilities.
With regulating assets as the core, the Guidelines for Interim Report aim to build an information disclosure system that aligns with the characteristics and rules of REITs. These guidelines specifically focus on strengthening regulatory norms related to the performance, standardized operations, and underlying asset operations of REITs.
Highlighting the Disclosure Responsibilities of Relevant Parties, Clearly Defining the Obligations and Special Disclosure Requirements of All Parties
While improving the basic requirements for information disclosure of infrastructure REITs, the Guidelines for Interim Report clearly define the obligations and special disclosure requirements of all parties, further highlighting the disclosure responsibilities of relevant parties. Firstly, it stipulates that fund managers should establish an information disclosure management system and operating management institutions should establish an information disclosure cooperation system, with senior managers assigned as the person in charge of information disclosure affairs. Secondly, it refines the scope of entities obliged to cooperate with information disclosure, urging related parties to provide relevant information to obligors of information disclosure on time and ensure that the information provided is true, accurate, and complete. Thirdly, it clarifies the requirements for voluntary disclosure and exemption from disclosure. According to the guidelines, the information disclosure obligors can voluntarily disclose information that affects investors' value judgments and investment decisions, proactively improve the quality of information disclosure service, and be exempted from disclosing information involving state secrets, permanent commercial secrets, or commercially sensitive information when certain conditions are met.
Highlighting the Characteristics of Penetrative Supervision, Refining the Disclosure Requirements of Infrastructure Projects
The Guidelines for Interim Report fully take into account the characteristic that the income of infrastructure REITs mainly comes from infrastructure projects. By refining the disclosure requirements for infrastructure project operations, the guidelines strengthen penetrative supervision. Firstly, it standardizes the information disclosure items of infrastructure project operations from multiple dimensions, focusing on the production and operation status of infrastructure projects, the stability of cash flow and its sources, changes in the qualifications of project companies, and the stability of operation and management institutions. Secondly, it strengthens the implementation of the main responsibilities of operation and management institutions, requiring these institutions to pay continuous attention to the operation of project assets, confirm the disclosure items, and inform fund managers of any disagreement about the content of the interim report disclosure. Then, fund managers should disclose the content of the disagreement and its reasons in the interim report. Thirdly, according to the types of underlying assets, key operational indicators are set with unified disclosure requirements, enhancing the comparability of the operation of underlying assets.
Strengthening the Responsibility of Operation Management, Standardizing the Disclosure Items at the Fund Level
The Guidelines for Interim Report standardize the information disclosure items at the fund level, urging fund managers to fulfill their product management responsibilities from aspects such as fund transactions, finance, and governance. Firstly, it refines the disclosure requirements for specific fund operation items, including financial items such as trading, purchases, or sales of infrastructure projects, major related transactions, new external borrowings, financial leverage exceeding the prescribed proportion, losses, infrastructure project assessments, etc., as well as governance matters such as major litigation or arbitration, publicity clarification, changes in business participants, key personnel changes or inability to perform their duties, etc. Secondly, by combining the experience from the pilot practice, the guidelines stipulate the standards for triggering information disclosure and suspension/resumption of trading due to secondary market price fluctuations, protecting investors' right to know, and maintaining stable secondary market trading.
Moving forward, the SSE will adhere to the arrangements and requirements of the CSRC, prioritize both standardization and development, ensuring effective supervision of information disclosure for listed REITs. The main focus will be on fostering an ecosystem that promotes interaction and trust between investment and financing, driving the high-quality development of the REITs market, and better serving national strategies and overall economic and social development.
