Sebi comes out with disclosure formats of governance compliance for REITs

Capital markets regulator Sebi on Monday came out with disclosure formats for compliance reports on governance and annual secretarial for emerging investment vehicles -- REITs and InvITs.

These would come into force from the financial year 2023-24 onwards, the Securities and Exchange Board of India (Sebi) said in four separate circulars.

Under the format for compliance report on governance, Sebi said infrastructure investment trusts (InvITs) and real estate infrastructure trusts (REITs) will have to disclose the name of the investment managers, the composition of the board of directors of the investment managers as well as the composition of committees, meetings of the board of directors, along with meetings of committees, on a quarterly basis.

In addition, the regulator has issued separate formats for the financial year that need to be submitted by the investment managers of InvITs and REITs.

For the governance report, such investment managers are required to submit a quarterly compliance report to the stock exchanges within 21 days from the end of each quarter. The report needs to be signed either by the compliance officer or the chief executive officer of the investment manager.

With regard to the annual secretarial compliance report, Sebi said the investment manager of the InvIT and REIT will have to appoint a practising company secretary on an annual basis to examine the compliance of all applicable rules, consequent to which, the practising company secretary is required to submit a report to such investment managers.

In the format for the annual secretarial compliance report, the investment managers of the investment instruments have to disclose the compliance with the regulatory norms, deviations and observations made by the practising company secretary.

In addition, disclosures need to be made about actions taken against the InvIT and REITs, their promoters and directors either by Sebi or by stock exchanges and the action taken by the investment manager to comply with the observations made in previous reports.

The investment manager of the InvIT and REIT is required to provide all such documents as may be sought by the practising company secretary for the purpose of providing a secretarial compliance report.

The investment manager of these investment instruments will have to submit the annual secretarial compliance report in a new format to the stock exchanges within 60 days from the end of each financial year.

The compliance report on both governance and annual secretarial would also be made part of the annual report of the InvITs and REITs.

REITs and InvITs were introduced in India to provide investors with an opportunity to gain exposure to real estate and infrastructure projects respectively, with diversification of risks through pooling arrangements.

Generally, REITs invest majorly in completed and rent-generating real estate assets. Privately placed InvITs can invest in under-construction assets as well as completed and revenue-generating assets.