Kathmandu: Allegations have surfaced that Prabin Pandak, CEO of CDS and Clearing Limited (CDSC), is undermining investors’ property rights by withholding shares from promoters’ demat accounts under the pretext of dual ISIN requirements.
For years, CDSC has enforced a rule requiring newly listed companies to obtain two separate ISINs via two trading symbols from the Nepal Stock Exchange.
As a result, promoters of recently listed firms such as Bikash Hydropower, Om Megashree Pharmaceuticals, Pure Energy, Sanvi Energy, and Trade Tower have not received their shares in dematerialized form, even though public investors have.
Currently, only the ISIN tied to public shares has been registered and distributed, while promoter shares remain unallocated. CDSC has also refused to merge ISINs for companies whose promoter lock-in periods have expired, despite NEPSE issuing a single trading symbol in such cases.
This policy shift, which began in the Nepali month of Falgun, has effectively frozen promoter-held shares, preventing their use as collateral or participation in transactions. CDSC maintains that there is no legal framework allowing ISIN consolidation, and Pandak has consistently cited the absence of clear regulations as justification.
However, critics point out that in earlier cases involving companies like NRN Infrastructure and Chandragiri Hills, CDSC had merged ISINs after lock-in periods ended, following NEPSE’s issuance of a unified trading symbol.
They argue that until new guidelines are formally approved, CDSC should continue operating under established precedent rather than halting share allocation. Experts warn that this rigid stance is infringing on property rights, as promoters are unable to access or leverage their own assets, creating significant financial constraints—particularly for large investors with billions tied up in such shares.
Market observers also contend that withholding shares under the excuse of regulatory gaps may amount to a financial offence. They argue that once dual ISINs have been issued, authorities cannot indefinitely delay either allocation or consolidation. Even in cases like Emerging Nepal, where NEPSE has already approved a single trading symbol, CDSC has failed to act accordingly, further intensifying criticism that it is not implementing exchange decisions as required.
International standards add another dimension to the debate. According to the Association of National Numbering Agencies (ANNA), securities that carry identical rights and returns should be treated as a single instrument. In Nepal, despite the distinction between promoter and public shares, both categories provide equal rights to dividends and voting at annual general meetings.
Therefore, experts argue, assigning separate ISINs is unnecessary and inconsistent with global practice. They note that different ISINs are typically reserved for instruments like bonds, which differ in rights such as interest payments and voting privileges.
Business leaders further allege that vested-interest groups are influencing the push for dual-ISIN enforcement. By restricting the entry of promoter shares into the market, these groups could artificially limit supply and drive up prices.
Pandak, however, defends her position by pointing out that company charters explicitly distinguish between promoter and public share classes, which she believes justifies separate ISIN assignments. She also argues that eventual merger provisions would mitigate concerns, urging the private sector not to overreact.
Despite these assurances, private-sector organisations have strongly opposed the policy. The Independent Power Producers’ Association Nepal estimates that promoter shares worth over Rs 22 billion across nearly two dozen companies remain unlisted due to the ISIN dispute, effectively locking up significant investor capital.
Similarly, the Solar Power Producers’ Association Nepal warns that enforcing dual ISIN rules could dampen investment in energy and infrastructure, complicate dividend repatriation for foreign investors, and discourage foreign direct investment.
Investor Dev Guragain offers a more nuanced view, suggesting that dual ISINs are not inherently problematic if applied conditionally. For sectors like hydropower, telecom, and mining, where projects operate under fixed-term licenses and are eventually transferred to the state, he argues that promoter shares should be convertible into public shares after a defined lock-in period to maintain investor appeal.
Conversely, for companies without such timelines, stricter rules may be necessary to prevent fraudulent practices involving shell companies. He emphasizes that clear, differentiated policies are essential to ensure fairness, protect genuine investors, and maintain market stability.
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