CDSCL awaits Sebon approval of bylaws

KATHMANDU, SEP 11 -

The Central Depositary System and Clearing Limited (CDSCL) is yet to begin its full-fledged operations as the Securities Board of Nepal (Sebon) did not approve the Clearing and Settlement Bylaws.

The CDSCL had forwarded the bylaws to the board for approval a month ago and the later sent it back asking for some changes.

“We found some serious flaws in the bylaws which need to be changed first,” said a senior official at Sebon. “Once they send them to us with necessary corrections, the board will approve the bylaws.” Sebon’s major concern was the statement in section-2 of the bylaws that stipulates the creation of a separate autonomous department for clearing and settlement within the CDSCL.

Arguing that the CDSCL itself is entitled to perform depositary, clearing and settlement of the securities, the Sebon official said a separate autonomous unit is unnecessary.

“The separate autonomous unit within the CDSCL will invite conflict of interest within the company in near future. That will make the board’s monitoring and regulation works difficult.”

Acknowledging the receipt of the Sebon’s comments on the bylaws, CDSCL Chief Executive Subodh Sharma Sigdel said their concerns would be addressed.

“We will send the draft of the bylaws on ‘mode of operation and implementation advisory team’ within our company,” said Sigdel. “It is the team of experts authorised by our company to make changes to the bylaws.”   

Meanwhile, another CDSCL official was also apprehensive towards setting up of a separate autonomous unit.

“Although the CDSCL management was against setting up such a unit, it was the board of directors who included it in the bylaws,” said the official.

Likewise, the board has also sought the operational details of the ‘settlement and guarantee fund’ mentioned in the bylaws. The clause-58 under section-7 states about such fund but it has not mentioned about the operational details.

An official from the CDSCL said that the settlement and guarantee fund is a very new concept in Nepal although it is considered as very important element of capital market throughout the world. “Even Nepse has not established such fund yet,” said the official.

“We are planning to hire a consultant from abroad to prepare operational details of such fund,” the official added.

Settlement and guarantee fund is important for the smooth functioning of the trading in the capital market.

The cash from such fund is necessary to award the victim whenever there is a default in the trading.

“Establishment of such fund is very crucial to win confidence of foreign investors in the domestic capital market,” said the Sebon official.   

Source: The Kathmandu Post