Half a dozen directives issued by Sebon aimed at implementing MoF committee report

KATHMANDU, Jan 3: The Securities Board of Nepal (Sebon) has instructed Nepal Stock Exchange (Nepse) to work toward providing permit to commercial banks to work as stockbrokers through their separate subsidiaries.

Issuing a press statement, the apex securities market regulator said on Wednesday that it has directed the stock exchange company to provide a recommendation letter to the board for issuance of stockbroker license in line with the Securities Businessperson (Stock Broker, Dealer & Market Maker) Regulation, 2064.  

The Nepal Rastra Bank (NRB) has already paved the legal way for commercial banks to set up their subsidiaries to work as stockbrokers. Three commercial banks -- Sanima Bank Ltd, NIC Asia Bank Ltd, and Citizens Bank International Ltd -- have already sought the central bank’s nod to work as stockbrokers. 

Bank subsidiaries are required to obtain a recommendation from the Nepse to apply for the stockbroker license with the Sebon. 

Though bringing commercial banks to the stock market to work as stockbroker was a top agenda of Sebon’s chairman Rewat Bahadur Karki since he joined the office, the plan was facing roadblock in lack of legal clearance from the central bank. The entry of commercial banks to work as subsidiaries in the stock market as brokerage firms is expected to boost competition in the market. 

“When the commercial banks work as stockbrokers through their subsidiaries, there will be more competition, transparency and efficiency in the secondary market,” said Karki. 

This is one among a half-dozen directives issued by the Sebon to Nepse along with CDS and Clearing Ltd as part of the capital market regulator to implement the 58-point report of a committee formed last month under the leadership of NRB Deputy Governor Shiva Raj Shrestha. 

The committee formed by the Ministry of Finance (MoF) to look into financial markets and capital market instability had submitted the report to the government last month that includes over one dozen of recommendations to the Sebon as well.

The Sebon directives are aimed at implementing those recommendations, according to the senior officials of the Sebon. “The directives to Nepse and CDSCL along with some of the works done by the Sebon itself are all meant to implement the recommendations of the report,” said Sebon’s spokesperson Niraj Giri, who was also a member of the committee. 

The Sebon has also told the Nepse to take the process of issuing license of stockbrokers in economically active districts. 

The Sebon has also directed the Nepse to revise the system of imposing circuit breaker in the market in line with international practices, to work toward establishing investors protection fund, to set up automated online system in the over-the-counter (OTC) market, and issue license to Employees Provident Fund, Citizens Investment Trust, Social Security Fund and securities businesspersons to work as market makers or dealers.

 
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