Share purchase loans: Brokers seek amendments to regulations
KATHMANDU, JUN 18 -
Stockbrokers have sought some amendments to the Securities Businessperson Regulations 2008 so as to make investors able to get share purchase loans.
As per the government decision, the Nepal Rastra Bank (NRB) recently allowed banks and financial institutions (BFIs) to extend share purchase loans to investors against the guarantee of stockbrokers. But the regulations are mum over such a lending.
Section-27 of Chapter 6 of the regulation reads, “The stockbrokers may provide brokering services of purchasing or selling securities in the name of client only as per the client’s order. The stockbroker shall not be allowed to carry out other business pursuant to these regulations other than the business as stockbroker.” Given the regulations barring brokers from carrying out jobs other than those mentioned, brokers are seeking amendments to the regulations.
Anjan Raj Poudyal, president of the Stockbrokers’ Association of Nepal (SBAN), said Sebon must change the aforementioned section of the regulations to enable stockbrokers to operate as guarantors. The association is scheduled to forward its suggestions on the matter to Sebon on Monday.
Brokers have also sought amendments to the Section 28 of the regulations that says, “The stockbroker shall require receiving the order from the client and shall make transaction only after registering such order.”
In the case of margin calls by BFIs due to slump in stock price, investors are either required to increase the margin of their investment or brokers will have to sell their stock to repay loans to BFIs. “But the existing provision forbids stockbrokers from selling the client’s shares without their order,” said Poudyal.
Also, the Section-32 forbids stockbrokers from accepting any amount other than the fixed commission for executing share buying/selling orders. “Since we also offer guarantee, we also share risk and thus, deserve better incentives,” said Poudyal.
Sebon Director Niraj Giri said the board will address the issue as soon as possible. “As soon as we receive the association’s letter, we will make necessary amendments after holding a board meeting,” said Giri. “Since it is the ministry’s decision, there is no point in delaying by us.”
Source: The Kathmandu Post
