THE stock exchange will ban the listing of covered warrants issued by controlling shareholders on their own shares.
In new rules due to come into force on October 1, the exchange is taking the controversial step of closing the door on covered warrants similar to those issued by Li Ka-shing on Cheung Kong (Holdings) and Hutchison Whampoa and Gordon Wu Ying-sheung on Hopewell Holdings.
Mr Li is chairman of both of his companies and Mr Wu is managing director of Hopewell.
A statement from the exchange yesterday said: ''Because of the potentially conflicting interests where an issuer of derivative warrants also has control over the underlying listed company, warrants issued by controlling shareholders or by persons with effective management control over the underlying company will no longer be considered suitable for listing.'' Covered warrants are traded derivatives entitling the investor to buy a share at a fixed price over a given period. The price of the warrant amounts to a premium; being the price expressed as a percentage of the current share price of the underlying share.
They can be settled in shares or the cash equivalent of the calculated money made on the purchase where the warrant is in the money.
Other changes include issuers having to state earlier in the proceedings whether a cash or stock alternative is being offered in settlement.
Issuers will have to state clearly and prominently in the listing document their regulatory status or unregulated status, as the case may be.