SEBON Introduces New Policy to Modernize Securities Brokerage Sector with Four-Tier Classification System

The Securities Board of Nepal (SEBON) has introduced the ‘Securities Brokerage Business Strengthening Policy, 2083’ in line with the ‘Capital Market Strengthening and Revival Action Plan, 2083’ issued by the Ministry of Finance on Bhadra 29, 2083. The action plan calls for the immediate publication of a policy for the institutional reform and strengthening of securities brokerage businesses.

The new policy aims to transform securities brokers into stronger and more competitive market intermediaries with adequate capital, professional management, modern technology, effective risk management systems and diversified securities-related services. The policy is built around strengthening capital, corporate governance, modern technology, effective risk management, fair market conduct and enhanced investor protection.

Under the policy, securities brokers will be classified into four categories based on their capital strength, risk-bearing capacity, service diversification and institutional capabilities.

Category A will comprise Stock Dealers, while Category B will include Full-Service Stock Brokers. Category C will consist of Trading Stock Brokers, and Category D will comprise Specialized Stock Brokers.

The classification is intended to establish a more structured brokerage industry in which the scope and responsibilities of brokerage firms correspond with their financial strength, operational capacity and range of services.

The policy has proposed a separate approval mechanism for brokers wishing to undertake specialized activities such as margin trading, securities lending and borrowing, short selling, intraday trading and market-making.

The framework also incorporates provisions related to customer complaint management, investor compensation funds and the provision of daily or real-time account and transaction information to clients. In addition, it proposes a Resolution Framework for dealing with securities brokerage firms facing financial or operational distress.

The policy requires securities brokers to maintain not only the prescribed minimum paid-up capital but also risk-based capital adequacy in line with the level of risk associated with their operations.

On the technology and cybersecurity front, the policy proposes mandatory measures including digital Know Your Customer (KYC), multi-factor authentication, robust order and risk management systems, cybersecurity infrastructure, regular IT audits and penetration testing.

These measures are aimed at strengthening the security and reliability of digital brokerage services while reducing operational, technological and cyber-related risks in the securities market.

The policy also seeks to facilitate mergers, acquisitions and business consolidation within the securities brokerage industry. Such consolidation is expected to support the development of financially stronger and institutionally capable brokerage firms.

Existing securities brokers will be provided with a transition period to comply with the new regulatory requirements. During this period, brokers will undergo gap assessment and compliance planning, followed by necessary upgrades in capital, technology and institutional capacity before being reclassified under the new framework.

The Securities Brokerage Business Strengthening Policy will be implemented progressively through three phases: institutional strengthening, expansion of market services and development of an integrated securities intermediary system.

Through the phased approach, SEBON aims to strengthen the institutional capacity of brokerage firms while expanding the range and quality of services available to investors. The policy is also expected to promote a more professional, technology-driven, risk-sensitive and competitive securities brokerage industry in Nepal.

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