Due to NEPSE and SEBON's Negligence, Investors Seeking Broker Licenses are Having Difficulty Getting Their Applications Approved

A task team established by SEBON earlier this year approved the proposal to modify the current Securities Dealers Regulations, 2064 BS. The board established a distinct task group to work on the stock market's development. The proposal to change the Securities Dealers Regulations, 2064, so that three different types of broker licenses can be issued was authorized by the same team.

The first of the three types of brokers will be issued for the group that only buys and sells shares. This is called a limited range of securities brokers. The minimum paid-up capital of this type of broker is fixed to be Rs 20 Crores. Similarly, a broker who works as a DP along with buying and selling shares provides investment advisory services and investment management, and also provides services related to margin trading is called a full-fledged securities broker who will be issued the second type of license. The minimum paid-up capital of a broker under the second category is fixed to be Rs 60 Crores.

The board informed that a stock dealer company will be allowed to operate with the license of the third category. The minimum repayment capital of the third type of securities brokers is fixed to be Rs 1.5 Arba.

Regarding the aforementioned, on Ashoj 2, SEBON issued an invitation to all competent institutions to apply for Stock Broker and Stock Dealer licenses.

One of the primary requirements for organizations wanting to conduct securities business as brokers and dealers are that they submit an application to the Board within 30 days of the date of publication of the notice, along with all necessary supporting documentation, in accordance with the Securities Act of 2063, its rules, and applicable laws.

However, there is still a lot of uncertainty among investors regarding the information that must be submitted in order to apply for the license, despite the fact that there is only 5 days until the application deadline.

Initially, SEBON was the one to call for applications for stock broker and stock dealer licenses, and all supporting documentation can be delivered to SEBON directly. Nevertheless, there are a number of assertions that the applicant must first obtain valid recommendations from the Nepal Stock Exchange (NEPSE) before submitting the necessary paperwork to the SEBON for further processing.

We have been receiving a lot of calls from other prospective applicants who want to apply for a broker license. In light of this, during a talk with the NEPSE spokesperson, Murari Parajuli said that they have not received any applications from the investors looking to apply for a broker license.

However, many investors who are vying for broker licenses have asserted that NEPSE is withholding recommendation letters as a result of their unpopular stance on the establishment of the new stock exchange.

One of the potential brokers who has so far applied for a license also claimed that Mr. Giri Raj Dahal, Assistant Manager of NEPSE, gathered the applicant's documents without having them verified. According to Dahal, NEPSE has not received any information from SEBON on the registration of license application requests.

We also briefly spoke with SEBON regulatory member Binaya Acharya, who highlighted that in order to apply for a stockbroker license, a prior reference letter from NEPSE is mandatory and has also claimed that there has only been 1 application for the said license so far. The fact that SEBON received that one application without receiving a recommendation from NEPSE is another key cause for concern. According to sources, around 10 applications has been filed in NEPSE for approval so far.

No new licenses have been issued in the previous twelve years, and currently, the number of brokers is at 50. The establishment of additional brokerage firms has been pushed forward by the regulatory body after a decade, and yet there is so much confusion. Investors need SEBON and NEPSE to provide clarification on this matter as soon as possible due to the numerous misunderstandings, particularly given the short amount of time before the application deadline.