Interaction session held by Nepal Share Hub and SEBON; List of suggestions provided to SEBON

Nepal Share Hub had organized an interactive session on "Capital market development and expansion possibilities as well as challenges" with support from the Securities Board of Nepal (SEBON) last Friday. The program hosted major personalities from all sectors ranging from investors to merchant bankers, scholars and professors to economic journalists. The purpose of the interaction was to gather suggestions from those present in order to further develop and expand the capital market of Nepal.

The program began with a presentation from Narayan Sharma from SEBON. He provided an overview of the current market situation with major statistics and recent developments. Then the floor was opened for the participants to provide suggestions. Some of those suggestions are:

• SEBON should more focus more on financial education rather than policies.
• Increase the use of audio and visual media to generate awareness
• Establishment of help desk at broker offices to help new investors
• The tradition of fraction share must be removed because that gets nowhere and the owners don't have information about it and what to do with it
• The share listing procedure must be faster. When the bonus and right come to the Demat account, it takes a lot of time and if the investor has already sold the prior shares then Mero Share doesn't consider that cost while considering the average price of bonus and right share. So the listing must be very prompt.
• Only 1/3 of the total market capitalization is in float, so we must find ways to increase the float amount
• Definition of QIB [Qualified Institutional Buyer] and QII [Qualified Institutional Investor] must be clarified
• Credit scoring agencies must also be licensed as credit rating is expensive
• Price sensitive information must be properly and timely disclosed to avoid manipulation
• The regulation of management needs to be tighter. Even after the merger, the swap amount is shown is operating income, which for a layman creates a distorted image of the company's earning capability.
• Mutual funds' fund manager should be different than sponsor rather than its subsidiary merchant bank

• Securities market judicial body is required as it is hassle and time consuming to go to the district court
• In the case of the sectors that don't have regulators, SEBON needs to prepare a framework to regulate them rather than to leave as it is.
• The time limit must be given to merger and acquisition in order to shorten the trading halt period
• Providing authority to NEPSE to penalize companies who don't renew on time or provide false information, which currently is with SEBON.
• A lot of talks about capital market training is going but the course is not clear and people are teaching whatever they feel like. So a course must be determined and trainers must be licensed
• Hydropower doesn't publish quantity or units of electricity sold and the per-unit price which changes based on the season. The Regulatory body had come but not much is heard. So they must be asked to publish this information along with the time period left on their license. Also, they need to disclose information regarding tax rebates they are taking and from when they will have to start paying tax.
• In the case of public issues, the prospectus mentions the objective of the issue and where the fund is to be used. So follow up regarding how they are being used after the issue must be done.
• HIDCL has 11 arba capital but has invested 3 arba only. And again is trying to bring 100% right. So that must be stopped.
• Dividend amendment after the rejection from NRB where in fact the company itself must know how much they can distribute. In such case, the management must be held accountable.
• Chartered Accountants (CA) are also providing consultancy for which merchant banks have taken a license. So for that mechanism must be made where either they also need to have a license or merchant bank and CA can collaborate to move ahead.
• Securitization of mortgage and secured loans into bonds.
• We are distributing online trading login to everyone without knowing their qualifications and capability. So training must be held and only those passing it should be given license.
• Insider trading must be checked and punished not just in theory but in real life too.
• Mutual Funds are directed towards small investors, but that doesn't seem the case. So until that happens we can't consider it a success.