The Ministry of Finance is seeking public input on a draft Circular guiding the issuance of covered warrants (CW). This draft details the types of warrants, underlying securities, issuance limits, execution methods, warrant adjustments, and provisions for risk management and investor protection.
According to the draft, a covered warrant is a security issued by a securities company, granting the holder the right to buy or sell underlying securities at a predetermined price with the issuing organization.
Warrant execution is settled in cash, with a term ranging from 3 months to a maximum of 2 years. The minimum offering price is set at 1,000 VND per warrant, and the minimum offering quantity is 1 million units, in multiples of 10.
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Issuing organizations can only offer warrants based on eligible underlying securities, not on their own shares or those of related entities.
Underlying shares must be part of the VN30 or HNX30 indices, with an average market capitalization of at least 5,000 billion VND over the past 6 months, a free-float ratio of 20% or higher, and must not be under warning or trading suspension.
Regarding issuance limits, the total number of warrants converted into shares must not exceed 10% of the free-float shares of the underlying securities issuer. The number of shares converted from warrants is calculated by dividing the number of warrants by the conversion ratio.
The limit on the number of shares converted from warrants in a single offering by the issuer must not exceed 1.5% of the total free-float shares of the underlying securities issuer.
Additionally, the value limit of warrants is based on the issuer’s available capital ratio, ranging from 0% to 20% depending on financial safety levels. Companies with higher available capital ratios are permitted to issue larger values.
The draft also outlines a mechanism to reduce issuance limits if the issuer violates risk management plans. Specifically, each warning results in a 25% reduction in the limit for the following 3 months.
If an issuer receives more than 3 warnings within the most recent 3 months, they will be prohibited from offering warrants for 6 months from the date of the most recent warning.
On a quarterly basis, within 7 working days of the following quarter, the Stock Exchange will publish a list of securities eligible as underlying securities for warrants and the allowable issuance limits for each underlying security.
The Ministry of Finance is currently publishing the full draft Circular for public feedback before finalizing and officially issuing it.
All feedback from organizations and individuals should be submitted to the State Securities Commission (SSC) by October 19, 2025.
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