SEBON and SBAN Hold Strategic Discussion; Proposal Submitted to Amend Securities Businessperson Regulations

A meeting was held at the Securities Board of Nepal (SEBON) office in Lalitpur between SEBON officials and representatives of the Stock Broker Association of Nepal (SBAN), focusing on expanding and streamlining the services provided by securities brokers in the country.

Following the discussion, SBAN formally submitted a comprehensive proposal to SEBON, urging for amendments to the Securities Businessperson Regulations, 2064. The proposed reforms seek to address regulatory bottlenecks and unlock new growth opportunities in Nepal's evolving capital market.

Key Proposals Presented by SBAN:

1. Relaxation in Ownership Restrictions:
   The Association has proposed a revision to Rule 7(1), suggesting that even if a financial institution holds more than 51% ownership in a subsidiary company, such a company should still be permitted to function as a securities dealer or broker under defined conditions.

2. Capital Requirements:
   SBAN recommends maintaining the current paid-up capital threshold as per the classification of FY 2080/81. Additionally, the Association has requested that the deadline for fulfilling the capital requirements be extended until FY 2084. The intent is to avoid further financial pressure on brokers who have already adjusted to the existing standards.

3. Expanded Service Scope (Rule 27):
   The proposal advocates for allowing brokers to provide a wider array of services, including:

   • Custodial and depository services

   • Portfolio management

   • Market-making activities

   • Mutual fund management

   • Investment advisory services

   • Proprietary and margin trading

4. Permitted Transactions:
   A provision has been suggested to permit brokers to serve their own shareholders, key employees, and immediate family members, provided there is stringent regulatory oversight and full disclosure.

5. Involvement in Primary Market Activities:
   SBAN has called for brokers to be allowed roles in the primary market, such as participating in underwriting and market stabilization during share issuances.

6. Insider Compliance Reporting:
   A clause has been proposed requiring brokers to report any insider transactions to SEBON within seven working days, ensuring transparency and compliance.

Rationale Behind the Proposals:

The Association emphasized that the current regulatory framework limits innovation and operational flexibility. Many licensed firms are unable to fully utilize their human resources or diversify their offerings due to outdated rules. The proposed amendments aim to align domestic practices with international standards, enhance service delivery, and build stronger investor trust.

SBAN has urged SEBON to review and adopt the proposed changes in a timely manner. The Association believes that the suggested reforms are essential to the sustainable development and modernization of Nepal’s capital markets.