Kathmandu: Securities Board of Nepal (SEBON) is unlikely to approve a draft directive submitted by CDS and Clearing Limited (CDSC), which proposes assigning separate International Securities Identification Numbers (ISINs) for promoter and public shares of the same company.
According to sources, the board has no intention of endorsing the draft as it stands.
“SEBON will not approve CDSC’s draft directive that recommends separate ISINs for promoter and public shares,” a source said, adding that a preliminary briefing on the proposal was held with CDSC on Tuesday. Further study will be conducted before SEBON reaches a conclusion.
The controversial proposal was included in a draft of the Securities Dematerialization and Operation Guidelines, prepared by CDSC. It introduces a provision not practiced internationally, prompting SEBON to consider forming a study committee to evaluate the proposal. The draft has already been sent back to CDSC, with instructions to align the ISIN policy with international best practices.
Globally, each class of security issued by a company is assigned a single ISIN code, which is a unique 12-character alphanumeric code used to identify securities during clearing, settlement, and reporting. In Nepal, the ISIN code begins with the prefix “NP.”
For example, if Company A issues common equity shares, those shares receive a single ISIN code. Preference shares and bonds issued by the same company would be assigned different ISINs — but only because they are different classes of securities.
However, in Nepal, banks and insurance companies have often received two separate ISINs for promoter and public shares, despite both being of the same type — common equity. This is largely due to regulatory distinctions made by Nepal Rastra Bank (NRB) and the Insurance Authority of Nepal.
CDSC’s managing director Praveen Pandak had proposed giving legal form to this dual-ISIN practice — a move that departs from global norms. The draft directive states that, in cases where legal provisions necessitate distinct ISINs, CDSC could provide separate ISIN codes at the request of the concerned institution, provided supporting documents are submitted.
Critics argue that such a provision is unnecessary in most cases. In companies other than banks and insurance providers, promoter and public shares are considered different only during the lock-in period. Once the lock-in expires, both types of shares are treated equally and can be traded freely. Since legal restrictions apply only before the lock-in is lifted, there is no need for separate ISINs once uniform trading conditions exist.
SEBON has reportedly instructed CDSC to revise the draft and bring it in line with international norms, reaffirming that a single ISIN should be assigned to all common equity shares of a company unless the securities are of fundamentally different classes.
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