Sebon to change guidelines in line with Act amendment

The capital market regulator has started the process to amend its guidelines to make it more contextual by improving the existing laws related to the securities market. The regulator is also going to amend its directives, bylaws, merchant banker guidelines, and other laws related to the securities market in line with the Securities Act amendment.
Securities Board of Nepal (Sebon) is amending the guidelines also in line with the government move as the Finance Ministry has already submitted an amended Securities Act at the Federal Parliament for approval. The regulator has also submitted its concerns and suggestions on the act to the Finance Ministry, before the ministry tabled it at the House.
“We have already started the process to amend our guidelines,” chairman of Sebon Rewat Bahadur Karki, confirmed adding that the regulator will however not release the guideline until the Securities Act is endorsed by the Parliament. “We have included provisions according to the global practices that are followed in the international markets.”
The amendment of Securities Act states that a person who has been assigned the post of chairman of Sebon will not be allowed to lead any other organisation that is affiliated or connected to the regulatory board after retirement. “The amendment has also included a provision that bars executive directors or deputy executive directors of Sebon to lead any organisation that is affiliated with the board for two years after their retirement.”
The regulator had recently issued new guidelines for all listed companies of Nepal Stock Exchange (Nepse) on corporate governance and accountability of companies towards their shareholders. “The guidelines will make the stock market more transparent and stable by promoting ethical practices among the listed companies, thereby making them accountable towards their shareholders,” Karki added.

Account payee cheque must to pay organisations

The central bank today asked banks and financial institutions to not accept bearer cheques issued to any organisation or firm for payments of over Rs 5 million from November 15.

The registered organisations and firms must issue account payee cheques of over Rs 5 million, said the central bank extending the deadline from its earlier plan.

Though, the central bank had asked the banks and financial institutions not to

honour bearer cheques meant for payments to any firm or organisation from the beginning of the current fiscal year, it has been postponed due to practical difficulties.
Since the country has supported the global fight against the flow of dirty money, the new provision will help make the huge transaction more transparent, the central bank said, adding that account payee cheque that refers to a cheque that directs the bank to deposit the amount specified in the cheque in the bank account of the person to whom the cheque is issued will make the transaction more transparent.

Now the banks and financial institutions have the right to reject the cheques that do not follow electric clearing standards from November 16. They will even not accept any cheque that is partially torn or has ink blots, the central bank’s circular today added.

Merchant banking subsidiaries

Likewise, the central bank has also paved the way for financial institutions to acquire merchant banking subsidiaries. Earlier, the regulations only addressed the establishment of merchant banking subsidiaries, and the new directives will pave the way for acquiring stakes in those companies.
Financial institutions can buy a stake in merchant banking subsidiaries after getting approval from the central bank.
However, merchant banking arms of financial institutions are not allowed to conduct any share transaction of the company itself and of the parent financial institution in the capital market.

New rule for problematic financial institutions
The central bank has also spared the problematic declared financial institutions from having to face the penalties for being unable to maintain regulatory Cash Reserve Ratio (CRR) and Statutory Liquidity Requirement (SLR). Once a financial institution is declared crisis-ridden, it is not allowed to accept any new deposits and float loans but depositors can withdraw deposits from those institutions. Currently, there are eight such problematic financial institutions.
The central bank has also forbidden close relatives of promoters or directors of financial institutions, who are employed in the same institution, to hold position at the company’s employee union. It will also be applicable to employees who hold less than one per cent of promoter shares of the financial institution.

Study calls to redefine role of merchant banks

A study has shown that the role of merchant bankers needs to be redefined.
Currently, the merchant bankers are acting as issue managers, underwriters, portfolio managers and share registrars that is not enough, according to senior trainer at the Revenue Administration Training Centre Basu Sharma, who is one of the member of the study team.
Earlier, banks and financial institutions used to work as merchant bankers but last October Securities Board of Nepal (Sebon) directed them to establish a separate company to perform the merchant banking business.
Currently, there are 14 merchant bankers under the new Merchant Banking Regulation that was brought in to make capital market regulator easy to regulate the merchant bankers as the banks and financial Institutions come under the Nepal Rastra Bank's juridiction.
At a time when the investors’ confidence is at its low, the study suggested to let the merchant bankers operate Unit Fund that could expand the operational scope of merchant bankers.
Unit investment fund represents a peculiar accumulator of temporarily free money resources of individuals and legal entities, directed for acquisition of securities, real property, currency values and other assets. Accumulation of monetary funds allows to form a diversified investment portfolio enabling considerable reduction of investment risk. It is different from Mutual Fund.
Theough merchant bankers have the aptitude to conduct businesses of securities brokerage, securities dealer, securities market maker, investment adviser, mutual fund manager, consultant for mergers and acquisitions, and conduct Central Depository System (CDS), they are currently working in a small area and need to widen investment opportunities, Sharma said, adding that enhancing the scope of merchant banks will help salvage the capital market from the current slump by injecting the investment in the right place.
"Giving a new investment opportunity will expand the market," Sharma said, adding that traditional investment pattern has to be changed to develop the market.


Sebon chairman appointment next week
KATHMANDU: According to the finance ministry''s call for the application for the post of the Securities Board of Nepal (Sebon) chairman, around a dozen applicants — including economic journalist Gajendra Bista and share market analyst Rabindra Bhattarai — have claimed the coveted post by the deadline on Sunday. The government has sought the application to chooe the professional leadership in the capital market regulator that has been without its head since last one month after the retirement of incumbent chairman Dr Surbir Poudyal. At a time when the share market has been performing poorly, the chairman's role is key to boost the investors' confidence. The share market started looking downward from 2009 when the current Prime Minister Dr Baburam Bhattarai was finance minister. If the Bhattarai-led government could select a professional chairman in the board, it will be able to boost the investors' moral and the market could bounce back.