Onus lies with SEBON to safeguard investors' interest in NB Bank row

ShareSansar, February 21:

As the regulator remains undecided over the ownership transfer of 2.2 lakh units of ordinary shares of Nepal Bangladesh Bank Limited, more than 1000 investors remain victimized for no fault of theirs.

No matter how complicated the matter is, the onus mainly lies with the Securities Board of Nepal (SEBON), and it is also a moral obligation for Nepal Stock Exchange Limited and the bank management, to see to it that the interest of these victims is safeguarded.

However, the regulator as well as NEPSE officials are apparently not working swiftly to settle the case – or they are hesitating to take a bold step in the wake of a court decree to keep the ownership transfer case “as it is”.
 
It’s been not only weeks but months since the complication surfaced, and the regulator has just begun collecting relevant documents and information regarding the case.

Similarly, the bank management, too, does not seemed to be much bothered about the case, as it does not affect their regular business, though NBB company secretary Dhiraj Raj Subedi told ShareSansar today that they also “want to see that the interest of the victimized investors is protected”.

But he was quick to add that the bank was not even thinking about deferring the upcoming Annual General Meeting – as demanded by these investors and the brokers as a stop gap measure till this problem is settled.

In a way, the NBB management is in a dilemma in that it is also responsible to many more of its shareholders. “All I can tell that this point is that preparations are in the full swing for the AGM,” added Subedi.

Apparently the investor forum and the stock brokers’ association are the only agencies, which seem to be striving for the protection of the rights of the victims.

It is natural for the investors and the brokers, who have huge stake in the market, to raise alarm over the case as it would directly and indirectly hurt their interest in the longer run.

And it is not surprising that Nirmal Pradhan, a leading stock investor who is in the center of the ownership transfer row, has urged Nepal Stock Exchange Limited to terminate the contracts of all the brokers for “unlawfully” stopping to trade in scrips registered in his name and the names of his family members.

Hence the crux of the matter is that the regulator has to act quick, especially in the wake of the announcement of the bank’s AGM slated for March 11 — lest the victims are deprived of 10 percent bonus shares and 7 percent cash dividend they are rightfully entitled to.

The case has become even more pressing as NBB stock is one of the most traded ones in the stock market.

Insofar as what is transpiring on the ground is considered, NEPSE has not processed Pradhan’s complaint, stating that they were investing the case. Besides the NEPSE, the Securities Board of Nepal (SEBON), the regulator, has started gathering all documents related to the matter to probe the case so that it can be resolved.

Over the past few days, the investors and brokers have stopped trading any shares held by Pradhan and his family members as well as those held by one Shankar Kumar Shrestha, who apparently worked in collusion with Pradhan, as well scrips of Nepal Bangladesh Bank Limited and National Hydropower Company Limited (NHPC) to press the concerned parties to settle the problem in investors’ interest.

They have also been urging the concerned authorities, including the NEPSE and the bank management to at least immediately postpone the AGM, which is expected to endorse 17.89 percent dividend, including 10 percent bonus shares.

Sources privy of the development say that in a bid to settle the complications related to the ownership transfer of NBB shares, key stakeholders, including SEBON, NEPSE officials, brokers and investors are likely to agree to defer the Annual General Meeting of the bank slated for March 11.

Though the book closure for the AGM has been announced, and adjusted base of Rs 552 announced, the sources privy of the development maintain that it would not practically affect the victimized investors.

The ownership transfer row of NBB and NHPC has resulted in the possible loss worth millions of rupees for more than 1 thousand investors who bought those shares unknowingly.

Though Nepal Investors’ Forum and Stock Brokers’ Association have been taking initiative to resolve the problem by bringing the stakeholders, including officials with SEBON and Nepal Stock Exchange Limited, the concerned bank and Pradhan together to find an amicable solution to the problem, there is no head way so far.

The ownership transfer row started after Pradhan and Shrestha obtained 220,000 units of ordinary shares from Laxmi Bahadur Shrestha, a promoter of NB Group and a former NBB director, for a loan.

While transferring the ownership of the shares, Laxmi Bahadur had made them sign another agreement, which barred them from selling those shares.  However, the duo went on to seek marginal lending by placing the same shares as collateral at Narayani National Finance.

Then they failed to repay the loan and the finance company sold the shares in the secondary market.

Laxmi Bahadur then filed a law suit against Pradhan and Shrestha at the Kathmandu District Court against the sale of the shares, and the court ruled in his favor asking the concerned authorities to stop transferring ownership of shares sold by the finance company.

Now Pradhan and company argue that they cannot be held responsible as they had only sought marginal lending from the finance company, and had not sold the shares to anyone else.