Bapepam allows issuance of warrant instruments

Bapepam allows issuance of warrant instruments

JAKARTA (JP): The Capital Market Supervisory Agency (Bapepam) finally gave its assent, over the weekend, to the issuance of warrant instruments on the domestic capital market.

Bacelius Ruru, the head of the capital market watchdog, said that the long-awaited regulations on the sale of warrants would be enforced to ensure certainty in warrant trading.

Besides stipulating guidelines on accounting standards for warrant instruments, the regulation also requires issuers to explain to the public the possible dilution impact of warrant issuances on stock prices, Ruru said in a statement.

The warrants allowable under the newly-issued regulations include the detachable, non-detachable and naked types. The capital market instruments currently traded on local stock exchanges are limited to equity stocks, bonds and rights shares.

Ruru said that the issuance of warrants on the local stock market was unavoidable as the local exchange activities could not be separated from the development of international capital markets.

The new regulations bring to an end public confusion over the offering of warrants, a popular derivative instrument in stock exchanges in advanced countries.

A number of publicly-listed companies planned last year to issue warrants as a sweetener for the issuance of their rights shares. None of the plans were realized due to the absence of capital market regulations on the instruments.

The planned issuance of warrants by publicly-listed Modern Realty, for example, was canceled due to lack of support from Bapepam, which considered the instrument to be too speculative, sources said.

Over the weekend Bapepam also issued regulations regarding the standardization of forms and the contents of annual reports published by publicly-listed companies.

Ruru said that, besides giving information about current activities and audited annual financial reports, public companies' annual reports should also provide summary financial information for the past five consecutive years.(hen)