In a significant move to enhance governance and compliance standards, the Securities and Exchange Board of India (Sebi) has unveiled disclosure formats for compliance reports on governance and annual secretarial for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These guidelines, set to be enforced from the financial year 2023-24 onwards, aim to provide investors with greater transparency and strengthen regulatory oversight within these emerging investment vehicles.
Under the new disclosure format, REITs and InvITs will be required to furnish key information on various aspects of governance. Quarterly disclosures will include the names of investment managers, details of the composition of the board of directors, and committee memberships. Additionally, the format mandates reporting on board meetings and committee gatherings, further ensuring accountability.
To streamline compliance procedures, Sebi has issued separate formats for investment managers of REITs and InvITs for the upcoming financial year. These investment managers will need to submit a quarterly compliance report to the stock exchanges within 21 days from the end of each quarter. The report must be signed by either the compliance officer or the chief executive officer of the investment manager, instilling a sense of responsibility and accountability.
Furthermore, Sebi’s guidelines emphasize the need for an annual secretarial compliance report, requiring investment managers of REITs and InvITs to engage a practicing company secretary to assess compliance with applicable rules. The company secretary is then responsible for submitting a comprehensive report to the investment managers. This report will include details of regulatory compliance, deviations, and observations made by the company secretary.
To strengthen transparency, the new format also necessitates disclosure of any actions taken against the InvITs and REITs, their promoters, and directors by Sebi or stock exchanges. Investment managers are required to outline the steps taken to address observations made in previous reports.
In order to facilitate thorough assessments, investment managers must provide all relevant documents as requested by the practicing company secretary to prepare the secretarial compliance report. The investment manager will then submit the annual secretarial compliance report in a new format to the stock exchanges within 60 days from the end of each financial year.
Importantly, these compliance reports on both governance and annual secretarial will form an integral part of the annual reports of REITs and InvITs. This ensures that stakeholders have a comprehensive understanding of the vehicles’ adherence to regulations and corporate governance practices.
REITs and InvITs were introduced in India to offer investors the opportunity to diversify risks and gain exposure to real estate and infrastructure projects, respectively. While REITs primarily focus on completed and rent-generating real estate assets, privately placed InvITs can invest in both under-construction and revenue-generating assets.
Sebi’s latest guidelines for disclosure formats underscore its commitment to maintaining the integrity of the market and safeguarding the interests of investors. By bolstering governance and compliance practices in REITs and InvITs, the regulator aims to foster a more transparent and accountable investment landscape.
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