Merchant Banker regulation comes into effect

Merchant Banker Regulation-2064 has come into effect from today.
"The introduction of this new instrument will help better manage capital market," said Dr Chiranjivi Nepal, chairman of the regulatory authority of the capital market, Security Board of Nepal (Sebon).
The regulation has defined — Issue Manager, Underwriter, Share Registrar and Portfolio Manager — four entities. They all have to get licences from the board before operating. "One company can also work as all the four," said Parista N Poudyal, director at the Sebon.
Issue Manager manages issues of shares; Underwriter underwrites shares that are not sold and buys unsold shares; Share Registrar keeps all the records of shareholders and helps register shares, while Portfolio Manager helps investors to manage their portfolio. They all have to get licence separately to operate as either one of the four, or all, from the regulatory authority, the Sebon.
In case, any company wants to operate as all the four, it must have a paid up capital of Rs 70 million. However, the paid up capital for Issuer Manager is Rs 30 million, Underwriter is Rs 40 million, Share Registrar is Rs 10 million and Portfolio Manager is Rs 10 million.
Currently, there are nine institutions that are operating as Merchant banks. "Though, they call themselves merchant banks, due to lack of regulation at present, most of them are operating like finance companies," he said, adding that they also have to get new licence. "Apart from them, nine new institutions have also applied to get the merchant bank's licence," Poudyal added.
To maintain transparency, Merchant banks must disclose their annual report within the three months after the end of fiscal year. They also have to submit their half-yearly report within the 60 days of half yearly closing, to the Sebon.
The new regulation is thought to bring more competition in the market as it will encourage the pure Merchant bankers. "They can be regulated by the board," Poudyal said adding that earlier due to dual regulation of Nepal Rastra Bank and the board, there had been some problems.

"Sebon is also bringing amended IPO regulation that will discourage people to buy shares without bank account and proper identity," informed Niraj Giri, director at the Sebon. "The time of share distribution will also be shortened to two months," he informed.
However, the board is yet to bring the Mutual Fund regulation. "Due to absence of Trust Act, the regulation is stalled," Nepal said, adding that the board is working on it. Mutual Fund is the most safe
investment opportunity for the people who have small savings and cannot buy shares. "It will also help stabilise the capital market as it can work as a balancing instrument," he added.
Sebon has been more active in the recent days as it has been conducting various programmes to aware investors and market players. From Next week, the board is conducting training programme every Friday at 1.30 for the investors.