Securities Board of Nepal (SEBON) held an interaction session today among all the stakeholders of the capital market including representatives from Nepal Stock Exchange (NEPSE), CDS and clearing, Investors' associations, Rating agencies, Economic journalists and institutional investors with an aim to collect suggestions from all parties for the upcoming policy for FY 2076/77.
The program began with brief description of achievements, challenges and objectives of capital market presented by Dr. Naba Raj Adhikari. The presentation was followed by suggestions from the participants, which are listed below.
- The lack of qualifications requirement for the Directors in companies seem to have created a conflict in interest. Therefore, a minimum requirement and restrictions should be set for the appointment of Directors.
- The presentation stated that necessary regulations are being framed for combating insider trading. However, Insider trading should be stopped categorically, not just in principals. So, for that we'll need a database that can track suspicious activities in real time and necessary actions can be taken.
- There should be a code of ethics for economic journalists too. Most often they collect news and act on it before publishing and given the fact that secondary market is information sensitive, should they be allowed to actively trade in NEPSE?
- Currently brokers are not allowed to do marketing and advertisements. Rather than restricting them, they should be allowed so that they can bring in new investors in the market.
- The SEBON should focus on the remaining points of 58-points suggestion submitted.
- The primary market has expanded but the rural investors buying IPOs are not aware about where to sell it, when to sell it and how to sell it. So that should be addressed.
- Companies should publish forecasted reports at the beginning of the quarter and comparison should be made between forecasted and actual performance. In case of deviation, they should be obligated to disclose the reasons and held accountable.
- In many cases huge discrepancies are seen between the Q4 report and the audited report that comes months later. So in such cases the company should be liable to answer.
- Awareness needs to be raised on what CSR entails via training and information circulation. Similarly CSR index should be created to measure their impact.
- The bond/debenture supply in market has increased by 800% this year but its trade in secondary market is still not picking up. So that needs to be looked into.
- The talks about making CIT and EPF, stock dealers of Nepali capital market should be finalized in terms of framework and working modality.
- Adding clearing bank
- Making credit rating more relevant
- Clarification in coupon rate determination of debenture on the basis of rating, maturity period and company's track performance as till now we can see not much difference between 5 year and 10 year debenture and the difference in credit rating.
- Clear distinction should be created between analyst and rumor by providing certification.
- Although not said explicitly, Mutual Funds are sort of the market maker for us and we can see their role during the liquidity shortage in the market. Many fund managers say that they are answerable to their parent company. So, the question is where does their fealty lie? Parent company or investors?
- Similarly if broker license is given to commercial banks then what is the mechanism?
- The AGM also should be made technology friendly as people from 77 districts are investing in primary market. This could solve the problem of proxy and increase participation.
- Policy wise, while bringing in foreign rating agencies to Nepal, the priority should be given to technology transfer not the capital. So that our rating is of international standard and acceptable worldwide.
- The pricing flexibility in rating can risk the quality of rating and rating companies may dilute quality for more business. So rigid pricing may push towards quality competition.
- The bank loan rating is being done but that is benefitting nobody so if that can be added to CAR rating then that can be useful.
- The current law requires rating companies to take acceptance from company before publishing the rating result but in international practice is the rating report is published as is with or without the consent of the rated company. So that should be practiced.
- The brokers' trading is halted if they don't submit report on time same should be extended for listed companies for report publications and AGM.
- Similarly, many people are conducting trainings for money without knowing well themselves which is a bad practice. So there should be intervention in this matter.
*The listed suggestion are given by the participants of todays' program at SEBON from different stakeholder organizations.