Research Of Legal Protection For The Reits Investors' Rights

REITs is a hot topic in the aspect of Chinese real estate financial innovation in recent years. 2009, the pilot projects of REITs were permitted to kick off by State Council in Beijing, Shanghai ,Tianjin and then Guangzhou in 2010. The appropriate time of the nearly ready REITs to come out which apply to Chinese conditions and laws is what REITs needs. A lot of scholars and professionals have been discussing the introduction of REITs'model and scheme. And this thesis focuses on protecting the rights of investors by revealing the potential investment risks, based on the experiences of U.S. protecting the REITs'investors under the sophisticated law systems, and the analysis of Chinese laws introducing REITs, trying to form the law to protect the Chinese REITs'investors.This thesis contains approximately 32,000 words. It consists of four sections as the main text, in addition to the introduction and conclusion parts.The first section is an overview of real estate investment trusts. It first presents the concept, characteristics, types, of REITs, etc.; then followed by the summary that REITs possess advantages through drawing comparison between REITs and several common financial tools, for example, real estate direct investment and bonds; and finally briefly introduces the necessity and feasibility of the introduction of REITs by China.The second part is the investor risk analysis of real estate investment trust. It reveals legal risks investors may face, mainly from three aspects, which are, moral hazard generated from the absence of a fiduciary duty, operational management risk incurred by inadequate internal management mechanisms, and liquidity risk arising from limitation on legal nature of REITs involvement. It focuses on the analysis of moral hazard for a trustee, and comes to a conclusion through a combination of the interest differentiation theory of investors and trustees, and the specialty of REITs: Investors may face the risk of being entrusted with any infringement of trustees, if there is no legal restrictions on trustees and incentive mechanisms.The third part is about how to draw on USA's experiences in providing legal protection to REITs investors. This part summarizes the following experiences drawn from USA's REITs legislation: tax preference for investors, investors'liquidity, Investor Bankrupt-risk Remoteness regulated by"Principle of Passive", trustee legal regulation(including the Prudent Investor Rule and the Trustee Faithful bligation), information disclosure and supervision system. After analyzing the applicability of these experiences, this part concludes that, three aspects of USA's REITs Investor Protection System can be applied in China: adopting the"Conditional Favor"legislation principle to regulate REITs practice, improving the legal regulation of the trustee system to balance the conflict of interest and providing liquidity as well as tax preference for investors.The forth part is about the forming of laws to protect the rights of Chinese REITs'investors, which is the most important part of the thesis. Firstly, I shall analyze the law barriers of Industry Investment Fund Law, Trust Law, Tax Law and Real Estate Law for introducing REITs into China. Secondly, from the angel of economy and recent implement, advising the lawmaking of REITs should select the form of specific legislation and China's Bank Regulatory Commission drawing up the rules.Next, based on the analysis of Trust Investment Company Real Estate Trust Regulation Interim Procedures issued by the China's Bank Regulatory Commission in 2004, I suggest concrete lawmaking advises of protecting the rights of Chinese REITs investors, which includes specific rules positioning on the forth level of Trust Law system, redefining the name of specific rules, advising the rules should be included the investment limits of REITs passive operation, the permission of related transaction under the regulation of the client obligation, the investment regulation of clients'dispersive investment and conditional authorization, the information revealing obligation featuring with real estate. The four aspects to protect the rights of investors.In addition to the law protection of REITs specific regulation, I also suggest to form multiple supervision and control systems, tax favor systems, investor compensation systems ,to solve the problems of REITs share circulation, which are applied to perfect the law to protect the rights of investors.