SSE Issues Main Business Rules for Infrastructure REITs
In order to improve the system of supporting rules for the publicly offered infrastructure Real Estate Investment Trusts (REITs) and ensure the orderly implementation of the pilot program, in accordance with the overall work deployment of the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange (SSE) has formulated and issued three sets of main business rules, namely the Business Measures for the Publicly Offered Infrastructure Real Estate Investment Trusts (REITs) (for Trial Implementation) (the "Business Measures" for short), the Guidelines No. 1 for the Application of the Rules for the Publicly Offered Infrastructure Real Estate Investment Trusts (REITs) - Review Concerns (for Trial Implementation) (the "Review Concerns" for short), and the Guidelines No. 2 for the Application of the Rules for the Publicly Offered Infrastructure Real Estate Investment Trusts (REITs) - Offering Business (for Trial Implementation) (the "Offering Business Guidelines" for short). The official release of the three sets of rules marks the new progress made by the SSE in advancing the pilot program of the publicly offered infrastructure REITs.
On April 30, 2020, the CSRC and the National Development and Reform Commission jointly issued a notice to officially launch the pilot program of the publicly offered infrastructure REITs. Attaching great importance, the SSE immediately set up a leading group and a task force to fully advance the work by making arrangements in the six areas of market expansion, business rules, technological development, internal regulations, product operations and comprehensive information. At present, the SSE has reserved a number of high-quality projects, with the technical system to be in place in the near future. In terms of drafting the rules, the SSE strives to build a "concise and user-friendly" system of business rules for REITs by adhering to a problem-oriented approach, conducting multiple rounds of special discussions and public consultations, drawing on the practices in the world, and fully respecting the development laws and actual needs of China's market.
The three sets of rules released this time mainly clarify the business process, review criteria and offering procedures for the publicly offered infrastructure REITs, and serve as important regulation guidance for market participants . Specifically, the Business Measures mainly regulate the entire business process of listing review, offering, trading, acquisition and information disclosure, etc. Based on the consultation version, the released version further simplifies the requirements for the application documents, optimizes the trading mechanisms, and improves the related requirements for project acquisitions and equity changes. The Review Concerns mainly explain the matters and main points for the review concerns, clarify the conditions and criteria for the application, and further improve the related requirements for the compliance, cash flow, and operating time limit, etc. for the infrastructure projects, based on the draft for comments. The Offering Business Guidelines mainly govern the issues such as inquiries, pricing and allotment for the issuance, and further optimize the related provisions on expansion methods and eligibility conditions for offline investors, etc., based on the draft for comments. After releasing the three rules, the SSE will make effective efforts in interpretation, publicity, training and investor education for the new business, and launch the "Infrastructure REITs" section on the SSE's official website, so as to help the market participants understand and familiarize themselves with the rules and requirements, and ensure the smooth implementation of the rules for the publicly offered infrastructure REITs.
Piloting the publicly offered REITs supports the implementation of China's supply-side structural financial reform, and serves new development stage, the new development philosophy and integration of new development pattern. The instrument can effectively revitalize idle assets, drive incremental investments, form a virtuous investment cycle, deleverage companies, increase the proportion of direct financing, and improve the support of the capital market for the real economy. Moreover, the product provide investors with a new category of asset allocation in addition to stocks, bonds, funds and derivatives, filling the gap in current financial products, enriching the investment tools in the capital market, and broadening the investment channels. Building the market of publicly offered REITs requires concerted and concrete efforts of all market participants.
Going forward, the SSE will, in accordance with the unified deployment of the CSRC, lose no time in make efforts in implementation, focus on project tracking and service, getting the market ready, first order guarantee, optimization of the trading mechanism and expansion of liquidity, etc., and strive to ensure the smooth launch of the first batch of projects. In addition, the SSE will, based on its functions as a market organizer and service provider, work with local governments, sponsors, fund managers, program managers and other parties concerned to jointly study and address the new situations and problems in piloting the infrastructure REITs, and continue to promote the long-term healthy development of the REITs market.
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