Kathmandu: In a significant move to strengthen the securities market, the Securities Board of Nepal (SEBON) has announced new regulations requiring investors to have sufficient funds in their bank accounts before purchasing shares in the secondary market.
The decision is part of the board’s Policy and Programme for the Fiscal Year 2025/26, aimed at reducing systemic risks and boosting investor confidence.
Under the new rule, share transactions will only be executed if the buyer’s bank account has the necessary funds, ensuring that trades are backed by actual liquidity. Previously, investors could place orders without immediate fund verification, leading to settlement risks.
SEBON stated that this measure will prevent market manipulation and protect small investors from potential defaults.
In another major reform, SEBON has mandated that funds must be blocked in applicants’ bank accounts as soon as they apply for an Initial Public Offering (IPO). The new system will integrate with CDS and Clearing (CDSC) through an API-based verification process, instantly confirming the availability of funds before approving an application.
This real-time verification will ensure that only genuine investors with adequate funds can participate in IPOs, reducing the chances of oversubscription fraud. Once shares are allotted, refunds (if applicable) will be processed automatically, making the process faster and more transparent.
SEBON has also prioritized the development of an equity derivatives market, which will allow investors to hedge risks and diversify their portfolios. The board will work on establishing the necessary legal and technical infrastructure to facilitate derivatives trading in the near future.
Additionally, SEBON will enforce stricter disclosure requirements for merchant bankers, brokerage firms, collective investment schemes, and listed companies. A risk-based supervision framework will be introduced to monitor market participants more effectively.
To further safeguard investors, SEBON will enhance the Investor Protection Fund to ensure swift compensation in case of fraud or broker insolvency. It will improve the classification system for listed companies, making it more transparent and aligned with global standards. It will monitor the utilization of funds raised through public offerings to ensure compliance with stated objectives.
SEBON will also increase surveillance on brokerage firms to verify whether they are properly executing client orders and maintaining adequate backup systems. This comes after complaints of brokers delaying trades or misusing client funds.
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