Indonesia Financial Services Authority/Otoritas Jasa Keuangan (“OJK”) recently issued a long-awaited regulation with respect to warrants through the issuance of the OJK Regulation No. 8/POJK.04/2021 on the Structured Warrant (“POJK 8/2021”), which came into effect on 19 March 2021. The newly introduced Structured Warrant is expected to increase the needs of market deepening, an alternative of investment, and hedging instruments in the capital market as well as to increase the liquidity of the trading in the stock exchange.
Below are the key points of POJK 8/2021:
The Structured Warrant means the securities are issued by an issuer, which gives the rights to the holder to buy or sell the underlying securities of the Structured Warrant at a certain price and within a certain period. The underlying of the Structured Warrant itself is the securities that become the basis of the transaction of the Structured Warrant, which may be in the form of (i) equity securities of the listed companies; or (ii) other types of securities as determined by OJK.
The equity securities as the underlying of the Structured Warrant shall fulfill the following criteria:
- shares of listed companies which have controlling shareholder;
- included in the list of securities that fulfill the criteria of securities that could be the underlying of the Structured Warrant issued by the stock exchange; and
- the total amount of the issued and transacted Structured Warrant is a maximum of 50% from the total ownership of the scrip less shares under 5% and does not include the shares that the listed company has repurchased.
The Issuance Requirement
The Structured Warrant shall be issued through a public offering, in which the issuer of the Structured Warrant shall file a registration statement with OJK. Similar to the other types of securities public offering, the offering of the Structured Warrant may only be carried out after the registration statement has become effective. If the issuer issues a new Structured Warrant within two years from the issuance of the last Structured Warrant, it may issue such a new Structured Warrant without submitting a new registration statement.
The issuance of the Structured Warrant shall fulfill the following criteria:
- each issuance of a Structured Warrant shall have a value of at least Rp5,000,000,000;
- Structured Warrant shall be issued with collateral;
- Structured Warrant shall be listed and traded on the stock exchange; and
- Structured Warrant shall be deposited in the collective custody at the central securities depository.
The Issuer of the Structured Warrant
The party that may be the issuer is a securities company that is a member of the stock exchange and shall fulfill the following criteria:
- having an adjusted net working capital, at least, in the amount of Rp250,000,000,000 based on the assessment by the stock exchange;
- having a financial statement that does not record negative equity in the last financial year; and
- being a structured warrant liquidity provider for each structured warrant series that is issued.
Further, POJK 8/2021 also provides obligations for the Issuer, among others:
- to provide information on the prospectus and the term sheet in case there is an affiliate relationship that is potentially causing a conflict of interest with the securities issuers whose securities are the underlying of the Structured Warrant;
- to have a risk management system for the issued Structured Warrant;
- to have a director that is responsible for the issued Structured Warrant;
- to have an official that is responsible for the risk management, marketing, and management of the conflict of interest of the issued Structured Warrant;
- to have a standard operating procedure on the implementation of the publishing, trading, and settlement activities of the Structured Warrant;
- to have an official as referred to in letter (4) above who understands products and transaction mechanisms of the Structured Warrant;
- to publish a financial statements that has been audited by a public accountant registered with OJK on the website of the issuer; and
- to conduct education and socialization of the issued Structured Warrant.
Having said the above, the issuance of the POJK 8/2021 not only provides a legal basis for the issuance trading but also monitors the Structured Warrant.
The Structured Warrant may be one of the options for investors who seek for a more innovative investment opportunity that is safe and liquid. The securities companies are expected to be in the driving seat of this new investment option. Nasoetion & Atyanto is happy to navigate the rule together with them to issue the Structured Warrant successfully.
By: Sheni Adriana