Regulator shows concern about CDS expenses

KATHMANDU,DEC 21: 

The capital market regulator has objected Central Depository System and Clearing Company’s proposed exorbitant expenses that will ultimately burden the investors as higher transaction fee.

“Securities Board of Nepal (Sebon)’s executive board has directed the CDS Company to revise its bylaw and cut down its exuberant expenditures else central depository will be deterrent for share market and investors,” an official at the regulatory authority informed.

The board has refused to approve the company’s bylaw with the present provision for expenses as mention in their bylaws that will translate as expensive transaction for the investors. The proposed bylaw has included expenses under different headings for depository participants that is more than the ones charged at other South Asian countries.

Operation of Nepal’s first central depository system is eagerly awaited by the capital market stakeholders as a means to promote faltering capital market. “But the company’s proposed cost is going to sabotage the share market,” according to the board.

The company will dematerialise the physical scrip promoting multiple transactions a single day. The system can transfer shares within minutes so that shares can be changed through multiple hands in a single day which is expected to increase transaction volume.

At present, it takes about two months for the share ownership transfer after the order placement so investors are unable to sell the shares immediately after the purchase.

“The company was supposed to facility and incentive for the investors but with the higher transaction cost the investors might be discouraged,” according to the regulator.

The investors need to pay 0.7 per cent to one per cent brokers commission, 0.015 per cent Sebon commission, five rupees ownership transfer charge for buyers, apart from capital gain tax, at present.

The company that was supposed come into operation from last fiscal year was granted licence by the capital market regulator this August but has not yet been able to get started due to delay in getting its bylaws approved. Its repeated attempt of framing bylaws has been rejected by the regulator for being half-baked, lacking in proper structure full of ambiguous and contradictory statements.

Investors awareness programme

Securities Board of Nepal is conducting nationwide Investor Awareness Programme starting in Nepalgunj on Tuesday. The classes regarding fundamentals of capital market is expected to be attended by college students and others. It will also be held in Dhangadi on Friday. and supposed to create awareness among the people residing away from capital regarding undertakings of capital market.