Securities Board of Nepal (Sebon), the capital market regulator, might suspend the licence of Nepal Finance Ltd (Nefisco) and stop it operating as Merchant Bank due to its alleged ‘fraudulent’ transaction of promoters shares.
“After suspension, it can not continue its work as a merchant banker; issue manager, underwriter or share registrar,” a source at the board said, adding that the board is taking a bold step to safeguard the investors’ interest, after the board got the complaints.
“However, Nefisco can complete its old assignments,” the source added.
Nefisco has sold promoters’ shares of Lumbini Bank — to the investors as ordinary shares — without declaring the status of the shares. The investors have been since last six months urging it to either give the share certificates they have bought or the money they have paid.
“The investors bought the shares thinking it an ordinary share. They have been accusing Nefisco of cheating them by not disclosing the status of these shares,” Anoj Agrawal, broker No 6, who had bought 3,500-unit of the promoters’ shares of Lumbini Bank Ltd from another broker said.
Though promoter’s shares can be sold and bought at the secondary market like ordinary shares, it has separate status. However, the seller must disclose the status of shares, submit necessary documents and get permission from the central bank before selling the promoter share.
Apart from that, the pricing mechanism is also different, it will be less than the market price.
Nefisco is blamed to have not followed the central bank’s directives. “We have been holding dialogues with the Lumbini bank and investors both,” Nefisco’s chief executive officer (CEO) Sudhindra Lal Pradhan said, adding that the brokers knew of the status of the shares before they traded. Despite several meetings of investors with Nefisco, Sebon, Nepse, Lumbini Bank, the case has not moved forward,” Agrawal said.
While, the blame game between the brokers and Nefisco is continuing, it is not the only case of ‘cheating’ investors by selling promoters shares in the price of ordinary shares, some other financial institutions have also sold promoters shares at the price of ordinary shares.
Last year, Kathmandu Finance Ltd sold its promoters’ shares to the public without declaring the status that those were promoter shares.
Ajay Siwakoti and his group of 10 friends bought 7,000-unit of shares at Rs 270 to Rs 250 through broker No 10 last August. At that time the price of the per unit share of the company was at only Rs 170.
Some of the buyers even sold 500-unit of shares at a price of Rs 330 through another broker No 29. Some of the high ranking government officials, who according to the law cannot hold promoters’s shares, also bought these shares.
When they came to know of the rule, they went to Nepal Rastra Bank (NRB) to complain of the ‘fraudulent’ transaction,” one of the investors said.They have lodged their complaints at Sebon and Nepal Stock Exchange Ltd (Nepse).