KATHMANDU, Aug 19: A bill designed to amend the Securities Act, 2063 BS has been registered in the Federal Parliament. Finance Minister Bishnu Prasad Paudel registered the bill in parliament last Friday.

A cabinet meeting held on July 1 had given its approval for registering this bill in the Federal Parliament.

The government introduced this bill stating that it has been a long time since the existing Securities Act came into force and it was necessary to make timely amendments and revisions to the existing legal framework by rendering the regulatory body and the work of regulation more effective in tune with the changes in the capital market.

The Ministry of Finance has stated that the draft of the bill has been prepared with participation of and in consultation with the stakeholder bodies and it has been registered in parliament as it is deemed necessary to make timely changes to the existing legal system for ensuring a systematic issuance and transaction of shares and for effective regulation of the share market.  

The Securities Act, 2063 BS is currently under implementation for mobilization of capital and development of the capital market, and for works ranging from protecting the interests of investors to regulating the capital market. The Securities Board of Nepal established as per this Act has been carrying out works like systematizing as well as regulating the issuance of shares of the incorporated companies and their trading. 

The bill has made a provision for putting in place a compensatory fund to protect investors from possible damage due to the systemic or other structural risks associated with share trading.

Similarly, prior-permission from the Board has been proposed to establish an organized institution to operate the Central Depository Service.

This service has been defined as a service for the dematerialization of securities of organized entities through digital means and for maintaining the central archiving of such securities. 

The bill also has the provisions for a Derivatives Market. 

Derivatives are meant to be understood as financial instruments such as derivatives contracts (forward, options, futures, and swaps) meant for trading in the securities market after a period of 30 days being based on listed securities or their prices or indices. 

The bill has also incorporated the provision of operating the Specialized Investment Fund that means any Private Equity Fund, Venture Capital Fund, Hedge Fund or other funds of a similar nature registered in the Board. 

The bill proposes provisions for setting limits on margin trading in securities, interest charges on those margins, and other regulations related to margin transactions. It has excluded the existing provision of including a representative from the Federation of Nepalese Chambers of Commerce and Industry and one individual as an expert member in the Board. 

It has proposed the authority to the Board to open its provincial branches, advising new provisions regarding the appointment procedures of Securities trustee, qualifications, duties, responsibilities and jurisdictions. 

The existing Act does not have the provision of a trustee. It is stated that the provision of a trustee aims to promote the interests of the beneficiaries or investors, and to further systematize the capital market making it more secure. 

It also warrants people serving as Chairperson, Executive Director, and Deputy Executive Directors of the Board ineligible for working for any organization that has been authorized by the Board after their retirement or removal from their positions.

 
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