SEC issues directive on trading of warrants

The Securities and Exchange Commission (SEC) has issued a directive stating that all listed companies are prohibited from trading warrants in the secondary market after the initial cut-off date with effect from 2 April 2012.

The SEC further stated that according to the listing rules of the Colombo Stock Exchange (CSE), listed companies are required to announce to the market the terms and conditions of warrants at the time of issuing them.

The terms and tenure of a warrant are determined by the risk attached to such financial instrument. Therefore, the warrant holders should not be allowed to transfer the risk attached to the terms of such share warrant after the risk event has occurred, by extending the cut-off date.