EFSA Issues New Rules for Warrants
EFSA Issues New Rules for Warrants
During March and April of this year, the Chairman of the Egyptian Financial Supervisory Authority (“EFSA”) issued two Decrees aiming at introducing into the Egyptian capital market a new mechanism: Warrants (Decision of EFSA Board of Directors No. 23 of 2012, and Chairman of EFSA Decision No. 282 of 2012, both published on EFSA’s website).
Warrants are a financial instrument which allows a listed company wishing to increase its capital – and where its shareholders have a right of first refusal – to list the right to subscribe independently from the share to which such right is normally attached, so that it may be traded separately. This allows the original shareholder who may not wish to subscribe into the share increase to benefit by selling their “right to subscribe” i.e. the warrant.
According to the new regulations, warrants are subject to the following conditions:
1) The right to subscribe may be registered during the period starting from registering the capital increase until its closure.
2) The company wishing to issue warrants must submit its request to the Stock Exchange at least five days prior to the start of the capital increase subscription period, and attach to it the approval by EFSA of the announcement to existing shareholders of the increase and that of the depository company.
3) The period between publication of the invitation to subscribe and the final day for trading the warrant must not be less than thirty days.
On the other hand, the Stock Exchange will apply the following rules:
1) The Exchange must disclose the beginning and end of the period for subscribing into the warrant separately from the shares.
2) Trading of the warrant takes place from the start of subscription until three days prior to closing of subscription in the capital increase.
3) The Exchange applies to the warrant the coding system known as (Isincode), and is registered in the Exchange database separate from the share registration.
4) Trading at the opening session represents the difference between the share closing price (with the warrant) and the assumed value based on the share without a warrant, and the Exchange may change this price but without the rules governing price limitations on the share.
5) Trading on the warrants can not be on margin or on “naked sale” basis.
Finally, other general listing and trading rules that are not in contradiction with the above will apply to the listing and trading of warrants, and will be subject to the normal supervision of EFSA.
All the above rules shall be applicable as of July 1st, 2012.
During March and April of this year, the Chairman of the Egyptian Financial Supervisory Authority (“EFSA”) issued two Decrees aiming at introducing into the Egyptian capital market a new mechanism: Warrants (Decision of EFSA Board of Directors No. 23 of 2012, and Chairman of EFSA Decision No. 282 of 2012, both published on EFSA’s website).
Warrants are a financial instrument which allows a listed company wishing to increase its capital – and where its shareholders have a right of first refusal – to list the right to subscribe independently from the share to which such right is normally attached, so that it may be traded separately. This allows the original shareholder who may not wish to subscribe into the share increase to benefit by selling their “right to subscribe” i.e. the warrant.
According to the new regulations, warrants are subject to the following conditions:
1) The right to subscribe may be registered during the period starting from registering the capital increase until its closure.
2) The company wishing to issue warrants must submit its request to the Stock Exchange at least five days prior to the start of the capital increase subscription period, and attach to it the approval by EFSA of the announcement to existing shareholders of the increase and that of the depository company.
3) The period between publication of the invitation to subscribe and the final day for trading the warrant must not be less than thirty days.
On the other hand, the Stock Exchange will apply the following rules:
1) The Exchange must disclose the beginning and end of the period for subscribing into the warrant separately from the shares.
2) Trading of the warrant takes place from the start of subscription until three days prior to closing of subscription in the capital increase.
3) The Exchange applies to the warrant the coding system known as (Isincode), and is registered in the Exchange database separate from the share registration.
4) Trading at the opening session represents the difference between the share closing price (with the warrant) and the assumed value based on the share without a warrant, and the Exchange may change this price but without the rules governing price limitations on the share.
5) Trading on the warrants can not be on margin or on “naked sale” basis.
Finally, other general listing and trading rules that are not in contradiction with the above will apply to the listing and trading of warrants, and will be subject to the normal supervision of EFSA.
All the above rules shall be applicable as of July 1st, 2012.