Covered Warrants in Vietnam – 1 Jan 2017


From 1 Jan 2017

The Ministry of Finance has issued Circular 107 (c107) on the sale and trading of covered warrants. It applies to Securities Companies, Custodian Banks, Stock exchanges, Vietnam securities depository and of course Investors.

Warrants are collateralized securities issued by securities companies giving the holder the right to buy or sell shares at a specific price on or before a stated time. There is a potential for larger capital gains/ losses because of the difference between the exercise price and the stock price.

The Circular regulates conditions under which an underlying security may have warrants. In particular, the underlying stocks must be listed on a stock exchange and meet criteria in terms of market capitalization, liquidity, free float, business performance, etc. The stocks must not be under „special control“, „suspended from trading“, „soon to be delisted“, etc. The issuer is not allowed to offer warrants using shares of the issuer or that of related parties.

The Circular states that within 03 working date after receipt of the warrant certificate, the issuer is required to make a deposit at their custodian bank to guarantee payment. The initial collateral value must meet 50% of the warrant offering. Guarantee assets can be cash, certificates of deposits or letter of payment guarantee issued by custodian banks.

The Circular takes effect from 01 Jan 2017.

There are much more details in the circular (in Vietnamese) regarding the mechanics of warrants:
– Offering, listing procedures of warrants
– Criteria of delisting, cancellation, suspension of trading
– Responsibilities of the issuance organization
– Responsibilities of related parties (Stock exchanges, VSD)
– Settlement procedures of warrants
– Standard Forms attached

Further information will follow in the coming weeks.

Source: MOF

Photo: CBR Investment AG