August 22, 2016 03:45 AM NPT
KATHMANDU, Aug 22: Securities Board of Nepal (Sebon) has issued a nine-point instruction to all depository participants (DPs) and share registrars to expedite and simplify services related to dematerialization of shares.
The capital market regulator has instructed DPs to open clients' demat account and provide debit instruction slip (DIS) within three working days of receiving application from them.
DP is a firm that holds securities of investors in electronic form like a bank holds cash of a depositor, and provides services related to transactions in securities. Similarly, DIS, like a bank check, is provided by DPs to investors for issuing written order for the debit of securities from his/her demat account.
According to the circular issued by the Sebon, DPs should submit the application and document received from investors for dematerialization of securities to share registrar or respective listed companies within seven business days. The share registrar should inform the DPs about the approval of the dematerialization, complete its entire works, including the signature verification, and revert to respective DPs within three business days, according to the instruction.
Sebon's instructions have come in the wake of complaints from investors that dematerialization process and the process to opening demat account is difficult and lengthy.
"There have been flurry of complaints from investors that DPs and RTs have been too slow to provide dematerialization services. We have issued the instructions following consultations with stakeholders concerned. This will help to make the dematerialization and trading process simpler, faster and systematic," Niraj Giri, the spokesperson for Sebon, says.
However, DPs say that the deadline to complete the process of opening demat account and providing DIS could be difficult to meet if investors come right before the initial public offering (IPO) of any company.
"Since demat account has been made mandatory for IPO, there will be a beeline of investors to open demat account one or two days before the IPO. It will be difficult to meet the deadline in such situation,” Shreejesh Ghimire, CEO of NMB Capital -- a DP, told Republica. "Otherwise, there is no problem in complying with the instructions."
Sebon has already made demat account mandatory for investors to apply for IPO in Kathmandu Valley from this month. Such requirements will be phased in outside Kathmandu Valley from mid-February next year.
Similarly, Sebon has also instructed brokerage firms, who also have a DP license, to not make it mandatory for its investors to open account in its own firm. Similarly, it has directed BFIs, who work as DPs, not to force investors opening demat account from its branch offices, to do financial transactions through them.