Legal Issues On Investor Protection In Real Estate Investment Trusts In China

The legal system of Real Estate Investment Trusts (REITs) was firstly created under the United States Internal Revenue Code in 1960s. As a new type of financial investment, REITs play a positive role in the aspects of perfecting real estate capital markets, effectively developing and utilizing real estate properties, and its provide an effective way to invest in real estate properties for the individual investors. Therefore, many scholars carry out useful studies about how to transplant REITs in China. However, few of the study have ever focused on the issue of investor protection in REITs. The author here believes that the protection of investor is one of the key factors for the success of REITs in China. We must strengthen investor protection, so that we can promote a smooth development of REITs in our country and achieve our goals as developing the industry of real estate and benefiting the investors in REITs.The text is divided into four chapters apart from introduction and conclusion:The first chapter is the basic theories of REITs in China, including the definition of REITs and brief discussion for its development path in China. The author points out that REITs in China should be advised to adopt the type which constituted by trust deed at the beginning, Therefore, the study in this article mainly base on REITs constituted by trust deed. Then, the author analyzes the legal relationship of REITs constituted by trust deed, and points out that REITs manager and REITs custodian both play the role of trustee.The second chapter studies the necessity of the investor protection in REITs. Combining the characteristics and the nature of REITs, the author analyzes the moral hazard that REITs investors faced from the theoretical and practical aspects, and points out the weakness of current legislation about investment funds in China. At the same time, the analysis also provides a breakthrough for the build of investor protection mechanism.The third chapter discusses the obligations of the trustee in REITs constituted by trust deed. The key of the investor protection is the restriction to the trustee, and. one of the point is the obligations of trustee. Through emphasize the respectively regulation of REITs managers' fiduciary duty and the custodians' supervision obligations, we can better protect the interests of investor.The fourth Chapter discusses the checks and balances mechanism in REITs constituted by trust deed, which is the other point of the restriction to the trustee. From the aspects of internal checks and balances and external supervision, the author puts forward some suggestion about the construction of investor lawsuit mechanism and the government supervision, and hope it can bring a better protection for the investor.