China Securities Regulatory Commission (CSRC) has recently released the “Interim Reporting Guidelines” for publicly offered infrastructure securities investment funds, also known as Real Estate Investment Trusts (REITs). The guidelines, jointly issued by the Shanghai Stock Exchange and the Shenzhen Stock Exchange, aim to build an information disclosure system that is in line with the characteristics and laws of REITs.
The “Interim Reporting Guidelines” focus on strengthening supervision and regulation related to the performance, standardized operations, and underlying asset operations of REITs. One of the key aspects is consolidating the disclosure responsibilities of entities involved in REITs. The guidelines require fund managers to establish an information disclosure management system, while operation management agencies should establish an information disclosure cooperation system. Senior managers are designated as the individuals responsible for information disclosure affairs.
The guidelines also outline the obligations of various entities involved in REITs and introduce special disclosure requirements. The aim is to ensure that relevant entities provide accurate and complete information in a timely manner. Additionally, the guidelines clarify the requirements for voluntary disclosure and exemption from disclosure. Information disclosure obligors are encouraged to voluntarily disclose information related to investors’ value judgments and investment decisions. However, certain conditions must be met for exemption from disclosure, such as state secrets or commercially sensitive information.
In order to strengthen supervision, the “Interim Reporting Guidelines” specifically address the characteristics of infrastructure REITs, whose income mainly comes from infrastructure projects. The guidelines refine the disclosure requirements for infrastructure project operations. This includes standardized information disclosure on the production and operation status of infrastructure projects, stability of cash flow and its sources, changes in subject qualifications, and the stability of the operation and management organization.
The guidelines also emphasize the importance of the main responsibility of the operation and management agency. If there is any objection to the disclosure content of the interim report, the operation and management agency must notify the fund manager, who will then disclose the objection and its reasons in the report. A unified disclosure standard for key operating indicators will be set according to the type of underlying assets to improve comparability.
The “Interim Reporting Guidelines” also cover fund-level information disclosure matters, including fund transactions, finance, and governance. The aim is to ensure that fund managers effectively fulfill their product management responsibilities.
These guidelines are a significant step towards implementing the CSRC’s requirements for the issuance of REITs in the infrastructure sector. They will help improve the construction of a rule system for infrastructure REITs and enhance the timeliness, effectiveness, and standardization of information disclosure. The guidelines will also encourage market participants to fulfill their responsibilities.