Research On Investor Protection Of Public Offering REITs In Infrastructure

In 2021,the first batch of nine infrastructure public offering REITs were listed,marking the beginning of China’s REITs pilot.Public offering REITs of infrastructure can revitalize the stock assets,broaden financing channels and deleverage the infrastructure operation mode with high debt of state-owned capital.In the research on the relevant systems of public offering REITs of infrastructure,the protection of REITs investors is undoubtedly the top priority.Article 3 of the guidelines for public offering of infrastructure securities investment funds(for Trial Implementation)of the CSRC stipulates that fund managers shall abide by the principle of "priority of interests of holders" when managing REITs assets.As an important part of REITs investors,the original equity holders may have investment risks to other investors due to their unique horizontal competition and interest conflicts.It is impossible to determine how the manager should weigh the interests and responsibilities between the original equity holders as investors and other investors only from the guidelines for public offering of infrastructure securities investment funds(for Trial Implementation)and the securities investment fund law of the People’s Republic of China as its superior law.Starting from practice,this paper studies the impact of the identity of the original equity holder on the investor protection mechanism of infrastructure public offering REITs from the various roles played by the original equity holder in infrastructure public offering REITs,analyzes the essence of the transaction structure of REITs by studying the regulation of the relevant legal norms of REITs on the original equity holder,and then provides suggestions to improve the investor protection mechanism of infrastructure public offering REITs in China.The details are as follows:In the first chapter,based on the actual experience of China’s infrastructure public REITs pilot stage,taking the first nine REITs funds as samples,the author makes statistics on their transaction structure,investor composition,manager mode,information disclosure and risk warning status,and analyzes the impact of the above statistical results on the protection of infrastructure public REITs investors.Research findings:Unlike the mainstream corporate REITs and trust REITs in foreign legislation,China’s public infrastructure REITs adopt the transaction structure of nested assetbacked securities of public funds.At present,under China’s empirical law,the securities investment fund law of the People’s Republic of China is the upper law,Its investor protection is mainly stipulated in the guidelines for public offering of infrastructure securities investment funds(for Trial Implementation),the securities investment fund law of the People’s Republic of China and the measures for the administration of information disclosure of securities investment funds.However,there are no special provisions on the legal subject of asset securitization,the "original equity holder",in the above laws.The investor composition of public REITs for infrastructure is classified into offline investors,strategic placement investors and public investors.Among them,offline investors and some strategic placement investors are institutional investors,and there may be some financial consumers among the public investors.As a strategic placement investor,the original equity holders are required by law to subscribe for 20%of the fund units,and in the first nine REITs funds,the original equity holders tend to subscribe for fund units above the limit,and may even control the National People’s Congress of fund unit holders due to holding more than half of the fund units,which is unfavorable to other investors.In addition to the original equity holders,REITs investors are more institutional investors and less financial consumers.Because of their weak position,financial consumers should be specially protected by the measures for the implementation of the people’s Bank of China on the protection of the rights and interests of financial consumers,while institutional investors should also be protected because they account for a large proportion and also face risks due to the excessive share held by the original equity holders.REITs manager mode is usually classified into internal management mode and external management mode.The internal management mode can reduce the first type of agency problem by reducing the agency chain.Because there may be a conflict of interest between investors,the internal management model will face the second kind of agency problem.The guidelines for public offering of infrastructure securities investment funds(for Trial Implementation)allows fund managers to entrust some management affairs to external management institutions,and in practice,China’s infrastructure public offering REITs generally adopts the practice of entrusting external management institutions.Through the statistics of the first batch of nine REITs fund managers,the author finds that the external management institutions of China’s infrastructure public offering REITs are all wholly-owned holding companies of the original equity holders or the original equity holders themselves.Investors are faced with greater risks of inter-bank competition and related party transactions caused by the conflict of interests of the original equity holders.The fund managers are only nominal managers,and the actual management power is controlled by the original equity holders.China’s REITs manager model is essentially an internal management model,and efforts should be made to prevent the second kind of agency problems.Taking Yantian REIT among the first nine REITs funds as an example,the author studies the Information Disclosure Responsibilities and contents of the original stakeholders of China’s infrastructure public offering REITs due to horizontal competition conflicts.Combined with the relevant theories of information disclosure,the author believes that there are deficiencies in the design that the original stakeholders are not listed as information disclosure obligors at this stage,Moreover,the content of information disclosure lacks continuous disclosure of horizontal competition risks and preventive measures,which should be improved.In the second chapter,the author starts from the lack of regulation on the transaction subject of the original equity holder under the existing securities investment fund legal system,and demonstrates that the infrastructure public fund is not a typical securities investment fund,so it is difficult to bring comprehensive protection to investors only from the securities investment fund legal system.The author believes that China’s infrastructure public offering REITs has a certain essence of listed companies.In the third chapter,based on the essence of REITs listed companies,the author analyzes and reflects on the problems raised in the first chapter with the concept of corporate governance,and advocates that the investor protection and supervision of REITs funds should refer to the standards of listed companies,the original equity holders should bear fiduciary obligations to other REITs investors,and the fund managers should return to their identity as intermediary service institutions in the essence of REITs listed companies and bear corresponding responsibilities,As the actual controller of REITs,the original equity holder shall be responsible for information disclosure.In the fourth chapter,combined with the research results of Chapter 2 and Chapter3 and the lack of REITs investor protection at this stage summarized in Chapter 1,the author puts forward some suggestions to improve China’s infrastructure public offering REITs investor protection mechanism.After weighing the priority of public interests represented by public fund investors and infrastructure,the author believes that the original equity holders should bear fiduciary obligations to other REITs investors on the premise of recognizing the actual control status of REITs,strengthen the continuous disclosure of horizontal competition information of the original equity holders,and clarify the Information Disclosure Responsibilities of the original equity holders,Establish an investor relief mechanism for the original equity holders to bear civil liability for breach of trust,gradually build a REITs information disclosure market guided by the needs of investors by strengthening the education of financial consumers and giving full play to the advantages of fund managers’ intermediary service institutions,improve the exit mechanism of investors,and force the original equity holders to fulfill their obligations of loyalty and diligence through the practice of independent market regulation,Improve the situation of REITs investors under the actual control of original equity holders.