Brokers withdraw from CM process over DP row
ShareSansar, November 24:
A new row has surfaced between the Securities Board of Nepal (SEBON) and the stock brokers over full-fledged operation of CDS — with or without the participation of brokers as Depository Members (DP).
Stock Brokers Association has directed all its members all the brokers who have taken the license for Clearing Members (CM) to halt the process immediately after the SEBON directed the CDC to go for full-fledged operation even without the involvement of brokers as DP.
According to the existing regulations, any party applying for the DP must have a net worth of Rs 1crore. However, none of the 50 brokers have reached this threshold.
More than half the number of brokers have net worth below Rs 60 lakh.
“When we sought five years time to achieve the required net worth of Rs 1 crore about a month ago, the SEBON officials had given a positive response to us, saying that they will consider our request,” says Narendra Sijapati, chairman of the Brokers Association told ShareSansar.com. “However, the regulator has now directed CDSC to go ahead with full-fledged operation even without our involvement as DPs.”
Sijapati said that it was crucial to involve the brokers as the DPs to reduce the hassles for the investors.
A broker can execute the order from the investor only after the demat shares are transferred to the brokers account through the DP.
“Since the brokers as CMs have to verify the share certificates before the transaction, if another party is a DP then the brokers could face complications,”
Sijapati further said. “If anything goes wrong in the process, then the brokers will have to pay 20 percent compensation to the CDSC.”
The brokers insist that the SEBON must also help brokers become the DPs since it is an internationally accepted practice.
It may also be noted here that the CDSC is yet to process the application filed by one of the brokers, Trishul Securities, which had applied for the DP months ago.
Similar dispute between the SEBON and the brokers over the CM was resolved in August after the regulator agreed to let the brokers submit a bank guarantee instead of Rs 10 lakh for the CM.
