Sebon tightens FPO process

Published On: May 29, 2017 12:40 AM NPT By: Republica

KATHMANDU, May 29: Listed companies will be allowed to float their next further public offering (FPO) only five years after their earlier FPO, according to a new rule introduced by the Securities Board of Nepal (Sebon).
Introducing Securities Registration and Issue Guidelines, the Sebon restricted public companies from issuing further public shares in a short span of time.

The new regulation means Shikhar Insurance Company Ltd, which had sought approval to float 1.36 million units of shares, will not be able to float its FPO.

Organizing a press meet on Sunday, Sebon Chairman Rewat Bahadur Karki said that the restriction was aimed at discouraging the misuse of the FPO by listed companies.

"Lately, a practice of using the FPO for trading or commercial purpose has been seen in the market instead of using it as capital for expanding its business," Karki added.

Through the guidelines, the Sebon has also set a formula for fixing premium share price for companies that wants to float their primary shares adding premium. 

Meanwhile, the Sebon has also raised minimum paid-up capital requirement for a brokerage firm to Rs 20 million from existing Rs 2 million. Brokerage firms will have to meet the new paid-up capital requirement by mid-January next year, according to the new requirement.

Making amendment to the Securities Businessperson (Stock Broker, Dealer & Market Maker) Regulation, 2064, the Sebon also made it mandatory for brokerage firms to get its nod before establishing their branch offices. 

The new requirement comes in the wake of rising number of brokerage firms opening their branch offices outside the Kathmandu valley. 

It has also set conditions for brokerage firms to open their branch office. The new requirements have been introduced to minimize the risk that rises with the expansion of trading network of the brokerage firms, according to Sebon Spokesperson Niraj Giri.

Brokerage firms should have at least 1,000 square feet of office space and at least five staff members, including the chief holding a Bachelor's degree on commerce, economy, law or management or chartered accountant, and a compliance officer and at least three computers with power backup, among other infrastructure requirements, according to the new rule. 

The brokerage firms, which have already established their branch offices, should meet the new requirements by mid-August, according to Giri. 

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