The Securities and Exchange Commission (SEC) has established a regulatory framework for structured warrants, opening the door to a new type of investment product in the Philippine capital market while putting safeguards in place for investors.
Under SEC Memorandum Circular No. 27, Series of 2026, structured warrants give investors the right, but not the obligation, to buy or sell an underlying financial instrument at a predetermined price or receive a cash settlement based on the asset’s value. The products may be linked to shares, securities indices, exchange-traded funds, listed debt securities, or baskets of eligible securities.
The new framework is designed to broaden the range of investible securities, support market liquidity, and provide investors with additional tools for portfolio diversification and risk management.
Only qualified broker-dealers, investment houses, and eligible foreign corporations licensed to operate in the Philippines may issue structured warrants. Issuers or their guarantors must maintain at least P400 million in unimpaired paid-up capital while the warrants remain outstanding.
The rules also establish minimum issue-size requirements. Generally, an offering must have at least P20 million in structured warrants, although the threshold may be P10 million when a designated market maker is involved. The SEC may revise these requirements depending on liquidity, investor demand, and market conditions.
Investor protection is another major component of the framework. Investors must undergo a client suitability assessment and sign a risk disclosure statement before they can trade structured warrants. Issuers must also clearly disclose the product’s terms, underlying assets, settlement arrangements, and risks involving market movements, volatility, liquidity, leverage, and the issuer or guarantor’s financial condition.
Structured warrants may generally remain outstanding for up to three years from issuance, unless the SEC approves a longer period. Eligible underlying securities must also satisfy requirements concerning listing, liquidity, market capitalization, trading activity, and other market standards.
The framework requires issuers to establish systems for managing credit, market, liquidity, legal, operational, and regulatory risks. Where market makers are used, issuers must disclose relevant information such as spreads, minimum quantities, and circumstances in which liquidity may not be available.
The SEC’s move creates a new segment of the Philippine capital market while setting registration, disclosure, suitability, and risk-management requirements before these products can be offered to investors.
