Sebon slashes net worth requirement for DP

KATHMANDU, Feb 12:

In a bid to make Central Depository System (CDS) functional at the earliest, the Securities Board of Nepal (Sebon) has decided to lower the required net worth for stock brokers by 50 percent to Rs 5 million.

A high level source at Sebon said the meeting of the board of directors (BoD) of the Sebon held on Friday decided to reduce the net worth requirement for brokerage firms so that they can be incorporated as depository participants (DPs) in the CDS and Clearing Ltd (CDSCL).

The decision, however, is subject to approval of the Ministry of Finance.

CDSCL acts as a central depository for various instruments (equity, bonds, and warrants etc) especially to handle securities in dematerialized form. DPs are intermediaries between the depository and the investors.

Brokerage firms had been showing reluctance to act as DPs stating that the net worth prescribed by Sebon is too high.

“As the stock brokers’ refusal to acquire the DP license citing infeasible net worth requirement has hampered the full functioning of the CDS, Sebon has decided to amend the Securities’ CDS Regulation 2067 to address the demands of the brokers by reducing the net worth requirement,” the source said.

The regulation had prescribed minimum net worth of Rs 10 million for brokerage firms. Most of the brokerage firms cannot meet the minimum net worth prescribed by Sebon.
Stock brokers have welcomed the decision. “We had long been demanding that Sebon revise the net worth requirement for full-fledged functioning of CDS,” SBAN president Narendra Sijapati told Republica. “The amendment has paved the way for us (brokerage firms) to be the DPs.”

Earlier, SBAN had launched protest programs demanding revision of the net worth requirement for the DPs. The association had even directed its members, who have already taken the license of Clearing Members (CM), to halt the process immediately after Sebon directed CDSCL to start full-fledged operation even without the involvement of brokerage firms.

Of the 50 brokerage firms in the country, only 35 have taken CM license so far.
Meanwhile, SBAN has decided to begin the process of taking CM license. “The meeting held on Tuesday decided to allow our members to take CM license,” added Sijapati.

Source: Republica