Regulation to keep share market clean

Security Board of Nepal (SEBON) introduced a regulation on Wednesday which aims to control malpractice in the share market and properly manage the market.

SEBON Chairman Dr. Chiranjiwi Nepal said the board had introduced the Security Registration and Issuance Regulation after nine months of preparation. Four additional regulations are already in place to regulate the stock market.

"The new regulation is expected to make the capital market more transparent and modernise it," Nepal said, adding that the new regulation will help reduce risks connected to the stock market.

According to the regulation, a company that has completed its first year of operation can issue shares only after it makes its audited financial report public. An applicant looking to invest more than Rs. 50,000 will be required to deposit an account payee cheque.

As per the new provision, companies issuing shares have been entitled to allocate five percent ordinary shares to their employees. But, hydropower related companies and other production and processing industries benefiting the local people can allocate additional five percent shares for local people.

But, such shares cannot be sold for three years from the date of issue.

SEBON said applicants and sales managers who submit wrong details during the process of share purchase shares will be fined. "The fined money will go for public awareness programmes," it said.

The board has also allowed companies to issue premium shares. Companies earning good profits may sell their share at a premium, which will be set as per their net assets per share.

Similarly, listed companies can issue additional shares to increase their capital base and attract new investors.

A company which wants to issue shares will have to sell at least 30 percent shares against its issued capital for the general people from now on. The regulation also allows companies to sell their shares through letters and electronic media after its annual general meeting takes a decision in this regard.

As per the new regulation, all shares of a company will have to be registered with SEBON. Earlier, only ordinary shares were required to be registered with SEBON. Even promoters' shares have to be registered with the board from now on.

Companies listed with SEBON and the stock exchange will have to submit their financial details to the board every three months. Before the new provision, banks and financial institutions had to submit reports every six months and manufacturing industries were required to submit reports every year.
Source: Ekantipur