Study On The Protection Mechanism Of Public Investors In REITs

On April 30,2020,the National Development and Reform Commission("NDRC")and the China Securities Regulatory Commission("CSRC")jointly issued the Circular on Promoting the Pilot Program of Real Estate Investment Trusts(REITs)in the Infrastructure Sector,which marks the official launch of Chinese public REITs on the market.Chinese public REITs include non-specific public investors in the investment market of REITs,which implements the policy concept that the capital market shall serve the real economy,but also brings great challenges to the protection of public investors.From the perspective of the current system,there are measures for the protection of public investors,but still not enough.For example,the standard of information disclosure is not clear.The typical example of Pingan-Guanghe REIT reveals the dilemma of public investor protection,reflects the legal relationship between public investors and originators,fund managers,fund custodians and relevant institutions,and clarifies that the information asymmetry caused by principal-agent relationship is the root cause of damages to the rights and interests of public investors,it also is the core of the public investors’ protection mechanism.The current protection of public investors of public REITs in our country is mainly reflected in the protection of their right to earnings by the provisions on mandatory dividends,their voting right by the establishment of fund unit holders’ meeting,their right to know by the provisions on information disclosure,and their right to relief by representative litigation and other systems.But all of these measures provide protection to investors as a whole,which fail to focus on the particularity of public investor protection in public REITs,especially the heterogeneity within investors.Accordingly,relevant suggestions on improving the current mechanism for protection of public investors in public REITs should including three aspects.For the legal system,we should formulate separate law and perfect the supporting system of corporate funds.In terms of external regulation,provisions are made clear on the application of penetrating regulation and the establishment of an exclusive industry association for REITs.At the level of internal governance,clarify the scope of the duty of care of fund managers and fund custodians,raise the discourse right of institutional investors,and intensify and strengthen the supervision over the exercise of institutional investors.