Sebon specifies stockbrokers' role

KATHMANDU, June 27:

Stock brokers can now work as a facilitator between financial institutions and investors who want to acquire a share purchase loan.

“Brokers will work only as a facilitator without sharing any financial liability for short-term loans,” according to chairman

of Securities Board of Nepal (Sebon) Baburam Shrestha.

“For long-term financing, we will soon bring guidelines for margin lending through brokers themselves,” he said, adding Sebon today specified the role of stock brokers in share purchase loan for the short-term to clarify functioning of brokers for short-term margin financing.

Brokers have to provide financial institutions the proof of share purchase by the investor and submit documents regarding blank transfer of the shares and later share certificates to financial institutions on behalf of the borrowing investor, according to Sebon.

Likewise, if the borrower sells the shares before the complete transfer of ownership then broker has to ensure that lending financial institution will get their lent amount. Finance Ministry had directed both Sebon and NRB to make provisions for allowing investors to obtain share purchase loans based on brokers’ guarantee.

Sebon and Nepal Rastra Bank (NRB) opened up margin type financing for investors based on a guarantee by brokers of purchase of shares, but roles and liabilities of brokers on the matter were ambiguous.

Brokers had demanded clarification regarding the mechanisms that needed to be followed and the responsibilities of brokers. “Sebon’s directive regarding brokers’ functions as a facilitator between financial institution and investor has only addressed the issue regarding liability on the part of brokers but there are still other issues that need clarification,” said president of Stock Brokers’ Association of Nepal Anjan Raj Paudyal.

For short-term share purchase loans, the authorities have asked brokers to guarantee that the share purchase has been made by the investor who can later acquire a loan. Earlier, banks provided loans only if the investor could furnish a share certificate making loan purchase possible in case the investor made full payment for the share and got it transferred.

Source: THT