Philippines SEC sets structured warrant rules to expand investment product offerings

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Philippines SEC structured warrant rules

Highlights

SEC Memorandum Circular No. 27, Series of 2026, establishes rules for structured warrants issuance, requiring at least P400 million in unimpaired paid-up capital for licensed issuers and guarantors.
Each structured warrant offering must have a minimum issue size of P20 million and may remain outstanding for up to three years unless extended by SEC approval.
Investors are required to undergo suitability assessments and risk disclosures, while issuers must meet strict listing, liquidity, risk management, and single market maker requirements before promotion.

Framework for issuance and trading

As reported by BusinessWorld Online, the Securities and Exchange Commission has issued rules governing structured warrants under SEC Memorandum Circular No. 27, Series of 2026, establishing the conditions for broker-dealers and investment houses to issue the products.

Under the rules, structured warrants give investors the right, but not the obligation, to buy or sell an underlying financial instrument, or receive a cash settlement based on its value. The products may be linked to shares listed on Philippine or foreign stock exchanges, securities indices, exchange-traded funds, listed debt securities, or baskets of listed shares or debt securities.

Licensed issuers and guarantors, when applicable, must maintain at least P400 million in unimpaired paid-up capital while the warrants remain outstanding. For non-collateralized warrants, issuers must generally hold an investment-grade credit rating from an SEC-recognized credit-rating agency, or provide a guarantee or security acceptable to the commission.

Each offering must have a minimum issue size of P20 million, although the SEC may revise that threshold depending on market conditions. Structured warrants may generally remain outstanding for up to three years from issuance unless the regulator approves a longer period.

Investor safeguards and market impact

Before investors can trade structured warrants, they must undergo a client suitability assessment and sign a risk disclosure statement. Issuers must also disclose warrant terms, the underlying financial instrument, settlement arrangements and product risks, including exposure to market movements, volatility, liquidity, leverage and the financial condition of the issuer or guarantor.

The rules require the underlying instruments to be listed on an exchange in good standing and to meet liquidity, market capitalization, trading volume and other exchange-set criteria. Issuers are also required to maintain systems for managing credit, market, liquidity, legal, operational and regulatory risks related to the products.

For offerings that use market makers, the framework requires disclosure of spreads, minimum quantities and circumstances when liquidity may not be available, with only one market maker allowed for each issue. Issuers may begin promoting an offering only after the SEC issues an order of registration and permit to sell, and the rules take effect 15 days after their last publication in two newspapers of general circulation.

Our earlier article on Shree Govardhan Steels Private Limited’s non-cooperative issuer rating status explained that the company remained flagged due to insufficient information for an ongoing credit assessment. We noted that such a designation can complicate capital raising, tighten funding terms, and prompt investors and lenders to apply heightened caution and additional due diligence.

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