The Securities and Exchange Commission (SEC) yesterday fired a new directive which will be applicable for future issuers of warrants.
The directive applicable for listed companies was under Section 13(c) of the SEC Act No. 36 of 1987 (As amended).
The SEC directed that the Colombo stock Exchange (CSE) impose several conditions when granting approvals to the issue of share warrants by public listed companies.
One of the conditions was applicable only to main board companies having a minimum public float of 25% at the time of application and Diri Savi Board companies having a minimum public float of 10% at the time of application.
The other condition was that total number of shares that could be purchased by the unexercised warrants issued by a listed company qualifying under the above criteria (including the total number of shares that could be purchased by the exercise of the warrants for which the application is made) shall not exceed 15% of the entity’s total number of voting shares issued at the time of the application.
The maturity date of warrants shall not exceed two years from the date of issue.
Following the directive, the CSE has to amend the listing rules to incorporate the new conditions to the grant of approvals in respect of share warrants by listed companies.
The CSE is also required to submit the amendments to the listing rules incorporating the changes to the SEC for approval within 21 days from the issuance of the directive.
Analysts said that the directive was to regularise the issuance of share warrants as part of investor protection as well as good corporate governance apart from safeguarding systemic soundness of the capital market.