Ritz Management System Changed to Pre-Management... Strengthening Investor Protection

The government is set to improve the supervisory system for the Real Estate Investment Trust (REIT) market and strengthen investor protection.

On the 18th, the Ministry of Land, Infrastructure and Transport announced that it has prepared a "REIT Supervisory System Reform Plan" to fundamentally change the current management and supervision system of REITs in order to protect actual investors and reduce the burden on REIT companies.

The REIT market has rapidly grown since the introduction of the REIT system, an indirect real estate investment vehicle, in 2001. The market size, which was 194 companies worth 34.2 trillion KRW in 2017, surged to 355 companies worth 91.7 trillion KRW as of last month.

However, the current REIT management and supervision system has failed to keep pace with changes in the REIT market, drawing criticism for being focused on formal inspections and post-violation penalties.

Accordingly, through this reform plan, the Ministry of Land, Infrastructure and Transport decided to shift the REIT market supervisory system from post-management to pre-management. They plan to establish an early warning system that notifies the schedule for fulfilling statutory obligations such as disclosures and reports in advance, shifting the supervisory system from post-detection to prevention, and also strengthen education for operational personnel.

Additionally, they will minimize overlap between on-site inspections and online inspections, and improve efficiency by focusing on verifying and inspecting significant suspected violations detected during the pre-online inspection phase on-site. Detailed inspection regulations will also be redesigned to clearly align with the purpose of each inspection type and the scope of legal delegation.

To enhance the effectiveness of sanctions, administrative penalties for relatively minor violations will be converted to fines with increased amounts, and the scope of administrative measures (warnings, cautions) will be expanded. Alongside this, a system of enforcement charges will be introduced for non-compliance with stock disposal orders.

Nam Young-woo, Director of Land Policy at the Ministry of Land, Infrastructure and Transport, said, "Through this reform plan, investor protection in REITs will be strengthened while the inspection burden on REIT companies will be eased, leading to healthier growth of the REIT market."

This content was produced with the assistance of AI translation services.