Clients’ presence made mandatory for opening beneficial owner account
August 26, 2017 08:35 AM NPT
KATHMANDU, August 26: The Securities Board of Nepal (Sebon) has issued a circular to all depository participants, directing them to open beneficial owner account only in the presence of the respective clients.
Depository participants (DPs) refer to the agent of the depository, or CDS and Clearing Limited in Nepal's case, where investors open their dematerialized account as a beneficial owner where their securities are deposited, debited and credited.
The new instruction of the capital market regulator comes in the wake of growing complaints of irregularities in the beneficial owner account opening process by some DPs. The Sebon's regular on-site and off-site inspections also showed that some depository participants were opening account without the physical presence of clients and doing unauthorized transactions by opening accounts.
Similar like opening an account in a bank for cash transactions, an investor, or beneficial owner, must open a demat account in DPs to get depository services.
The circular has instructed DPs to open beneficial owner accounts complying with the Asset (Money) Laundering Prevention Act, 2008 and Central Depository Service Regulation, among other related anti money laundering rules and regulations, while opening accounts.
A total of 65 companies, including merchant bankers, bank and financial institutions and stock brokerage firms, have acquired license from the Sebon to work as a depository participant.
The Sebon has said that the circular was aimed at making the securities market transparent and effective for protection of investors' interest. The capital market regulator has expressed commitment to enforce and strengthen the legal provisions for correcting weaknesses found in the capital market during its on-site and off-site inspections.
“The circular is intended to enforce the know-your-customer practice more strictly,” Niraj Giri, the Sebon's spokesperson, told Republica. “As some depository participants were reportedly opening beneficial owner account based on the document even in the absence of clients, we have instructed them to become more cautious on identification of their clients,” he added.