SEC releases draft framework for listing of structured warrants
THE SECURITIES and Exchange Commission (SEC) has released the draft framework that will allow for the listing and trading of structured warrants in the Philippines.
In a statement issued on Monday, the corporate regulator sought public comments on the draft rules and regulations Governing the Registration and Trading of Structured Warrants until Feb. 10.
Warrants are financial products hinged on other assets, such as stocks. These confer the right, but not the obligation, to either buy or sell the underlying assets at a pre-determined price on or before a certain date in the future.
The draft framework released by the SEC will allow for the registration and trading of structured warrants — aside from company warrants — in the Philippines.
Structured warrants are issued by third-party financial institutions over the shares of an unrelated listed company, a basket of shares or an index, among others. At present, the SEC only allows for the trading of warrants issued by companies and hinged on the assets of the issuers themselves.
“[A structured warrant] enables investors to participate in the price performance of an underlying asset at a fraction of its price,” the SEC noted in a briefer released alongside the draft rules.
“Therefore, structured warrants enable investors to free up their capital while maintaining a similar level of exposure to the underlying asset of otherwise increase their exposure for the same investment outlay.”
Under the draft rules, registered investment houses, brokers and dealers with a minimum paid-up capital of P500 million may issue structured warrants. They must comply with SEC requirements on risk management, sales and marketing practices as well as managing conflict of interest.
Issuers are further required to appoint a “warrant registrar” to maintain accurate books for the recording of transfers of the structured warrants.
Before selling, offering or distributing structured warrants, issuers must register the securities with the SEC by filing documents showing the terms and conditions of the plan, including the computational data.
The prospectus should include the description of all applicable exercise rights, information with respect to the underlying corporation, risks involved in purchasing the structured warrants, risk management practices, sales and marketing practices and procedures for managing conflict of interest of the issuer.
Structured warrants must subsequently be listed on the Philippine Stock Exchange (PSE) pursuant to the listing rules of the bourse.
At least 10 business days before the expiration or withdrawal of structured warrants from listing, issuers must submit to the SEC in writing and publish through their Web site and of the exchange about the expiry date, the date of withdrawal from listing, exercise price, expected date of payment or delivery and other information that may be required.
The trading of structured warrants on the exchange may be halted or suspended should the underlying shares become the subject of trading suspension or halt for whatever reason.
Stakeholders may submit their views, comments and inputs on the draft rules and regulations, which the SEC uploaded on its Web site, through electronic mail at mrd@sec.gov.ph and acayochok@sec.gov.ph.
The PSE, together with the SEC, has constantly worked on expanding its menu of investment products. In the past, the bourse has introduced exchange- traded funds, a list of Shari’ah- compliant securities for Muslim investors and real estate investment trusts.
For this year, the PSE and SEC have rolled out the listing of dollar-denominated securities and public-private partnerships working on infrastructure projects worth P5 billion and above.