The non-life insurer, with a market capitalization of Rs 329.06 million, stopped issuing new insurance policies beginning Tuesday and warned to close down the company in the future to protest issuance of corporate good governance directive by the Insurance Board -- the insurance sector regulator.[break]
“Since this news was carried by most of the national dailies, we decided to suspend transaction of the company´s stocks for the time being to conduct investigation,” Nepse Spokesperson Shambhu Pant told Republica. “We have already informed the company about our decision and will resume trading of the stocks once we get satisfactory answer from the insurer.”
Pant said Nepse´s listing bylaw gives the share market operator to suspend transaction of firms in special cases to protect such stocks from volatility.
“This is certainly not good news and we are concerned about our shareholders,” Madhu Sudhan Agrawal, a board director of Everest Insurance, told Republica.
“But since the good governance directive issued by the Insurance Board has made it difficult for us to do business, we had to resort to harsh measures.”
Agrawal was referring to provisions in the directive that bars insurance companies from generating business from its promoters, prevents one person from assuming the position of board director in multiple insurance companies and restricts more than one member of a family from assuming post of board director in the same company.
“Despite this and the suspension of share trading by Nepse, we won´t let harm come in the way of our shareholders,” Agrawal claimed.
Nepse´s decision to suspend Everest Insurance´s stock trading comes at a time when the investor interest on insurance companies is growing.
On Tuesday, for instance, Everest Insurance was able to conduct transaction of 10,000 units of its shares in a single day. This transaction, which was held a day before the news on company´s closure made its way to national dailies, however, raised suspicion of insider trading as the volume was too big for a company which was on average selling around 10 units of shares per day in the past 90 days.
“This is purely coincidence. If it has raised suspicion then we can do nothing about it,” said Anuj Agarwal of Agarwal Securities, which was both buyer and seller broker for 10,000 units of shares.
Nepse officials did not comment on the issue, but some brokers, on condition of anonymity, told Republica that the transaction smacked of insider trading.
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