Clearing and settlement mess: How long will investors continue to suffer?

ShareSansar, August 8:

On July 23 Nepal Stock Exchange Limited (Nepse) had directed all brokers and RTS companies to finish the ownership transfer process within 15 days time. But things have apparently not improved despite the directive.

But the officials concerned are not ready to admit this.

Nepse spokesperson Shambhu Panta argues that the brokers and RTS have become more serious following the directive. “Moreover, we are monitoring the situation closely, and will take action against those who continue to defy the directive,” he adds.

Chief Executive Officer of CDSC, Subodh Sharma Sigdel told ShareSansar that his office has already cleared all the ownership transfer (OT) as of now, though he admits that the process was slow over the past few days due to various reasons, including “the burst of transactions” in the bullish market.

However, a number of brokers told ShareSansar that CDSC has not cleared the OT deals till date, but has sent notice to them, stating that they will clear and settle the transactions during three days of public holidays in row stating from Saturday.

What is also worrying is that CDS officials seem to be shrugging off responsibility when it comes to act tough against those delaying the OT process, saying it was basically Nepse’s headache.

“Since Nepse had issued the directive, acting upon the CIAA’s directive, you should be asking Nepse officials as to what they are planning to do who delay the OT process,” CDSC CEO Sigdel says.

While the regulator’s largely apathetic approach to this serious problem is mainly responsible for the plight of the investors, stakeholders in the market also feel that the investors, too, need to mount pressure on brokers, RTS and the regulators in this regard.

On the other hand, investors complain that they have been victimized for long by this inefficient system, and are not much hopeful that things will change for better despite the latest Nepse directive.

“If I don’t get my stock on time, I not only stand to lose money in the market, but also confidence in the system,” says Jeevan Shrestha, a share investor. “This has been hurting the market for long and will continue to hurt it days to come – if the regulators do not swing into action immediately.”

Another share investor, SP Ghimire whines that though he had bought dozens of stock of SRBL back in February at around Rs 460 per unit share in the secondary market to cash in on the dividend proposed by the bank, he has not received the share certificates so far.

“I wanted to square them off when SRBL’s price was above Rs 500 a few weeks back,” Ghimire adds. “But due to inefficiency on the part of the RTS and CDSC -- God knows who else are involved in this mess -- I have been reduced to a mare spectator while the price has already come down to Rs 475. What if it tumbles further? Who is going to compensate for my loss?”

“Just visit CDS office now and you will be shocked. It’s more like a fish market than a subsidiary of the stock exchange where the crucial task of clearing and settlement of securities take place,” says a major share investor, requesting anonymity. “Share certificates and other important documents are littered all over the place, and they are struggling to process them. I won’t be surprised if some of the certificates go missing there.”

“Investors, too, need to be cautious about their rights and step forward to approach the regulator to complain if the concerned broker or RTS is delaying the share ownership transfer,” says Rajkumar Timilisana, Chairperson of Nepal Investors’ Forum. “And Nepse, which issued the directive, too, should act tough on the brokers and RTS who are guilty – instead of issuing the directive and being laid back after that.”

As an umbrella body of the investors, he further says, the Investors Forum has been lobbying with the brokers, RTS as well as the regulators to sort out this chronic problem.

In fact, Nepse had issued written directive to all the brokers and RTS companies only after a directive from the Commission for the Investigation of Abuse of Authority (CIAA) to Nepse to ask the stakeholders to comply by various provision of Company Act-2063 on ownership transfer.

The constitutional anti-corruption body has pressed Nepse to act tough on the brokers and RTS after some investors lodged complaints with the CIAA against the alleged irregularities on the part of the brokers and RTS.

Nepse has even warned to recommend Sebon to initiate action against those brokers and RTS as per Securities related Act 2063, which fail to comply with the latest directive. As per the article 88 and 89 of the Act, Sebon can even terminate licenses of the brokers and RTS if they fail to adhere to the Act.
 
Currently it takes around 2-3 months on average while some RTS takes much more time to transfer share ownership following the transaction. This has not only victimized hundreds of share investors who could not trade their shares when they want.