SEC sets P400-M capital floor for warrant issuers
Financial institutions that seek to issue structured warrants in the Philippines must maintain at least P400 million in unimpaired paid-up capital under new rules from the Securities and Exchange Commission (SEC).
The requirement must be met by the issuer or its guarantor for as long as any structured warrants remain outstanding.
Only licensed broker-dealers and licensed investment houses incorporated in the Philippines may issue the product.
Foreign corporations duly licensed to do business in the country are also eligible.
The requirements are contained in Memorandum Circular No. 27, which the SEC issued on Sept. 23 to govern the registration and trading of structured warrants.
A structured warrant gives its holder the right, but not the obligation, to buy or sell an underlying financial instrument at a predetermined price on or before an expiry date.
It may also provide a cash settlement computed using the price or level of the underlying instrument. A call warrant gives the holder the right to buy, while a put warrant carries the right to sell.
The SEC set the minimum issue size for structured warrants at P20 million.
Eligible underlying instruments include single equities listed on Philippine or foreign stock exchanges, securities indices and exchange-traded funds.
Structured warrants may also be linked to listed debt securities, baskets of listed equities or debt securities and other assets or reference values allowed by the commission.
For physically settled structured warrants linked to locally listed securities, the aggregate issue size must not exceed 50 percent of the underlying company’s issued shares, excluding treasury shares.
The computation will include all physically settled structured warrants already issued and outstanding.
Issuers must submit a registration statement and a prospectus containing the product’s terms, conditions and other material information.
