Finance Committee's 5-Point Directive for Capital Market Reform: Urges Immediate Introduction of New Securities Bill in Parliament
The Finance Committee under the House of Representatives has issued a 5-point directive to the government, the Securities Board, and NEPSE for comprehensive capital market reform. The committee instructed the immediate introduction of a new securities bill in Parliament, a review of IPO and promoter share ownership provisions, and the urgent appointment of vacant CEO positions at NEPSE and CDSC.
The Finance Committee under the House of Representatives has issued a 5-point directive to the government, the Securities Board of Nepal (SEBON), and the Nepal Stock Exchange (NEPSE) to bring about comprehensive capital market reform, end legal ambiguities, and curb undesirable market manipulation. In its meeting held on Wednesday, the committee directed the immediate introduction of a new securities bill in Parliament, a review of provisions related to primary share (IPO) issuance and promoter share ownership, and the urgent appointment of vacant Chief Executive Officer (CEO) positions at NEPSE and CDSC.
Addressing the Ministry of Finance, SEBON, and NEPSE, the parliamentary committee issued clear directives for policy and structural reforms to make the market modern, technology-friendly, transparent, and investor-friendly.
The committee concluded that the existing legal framework is inadequate to make the capital market well-managed, transparent, and credible while protecting the maximum interests of investors. To this end, it has directed the Ministry of Finance and the Securities Board to immediately draft a new securities bill that clearly defines the roles, responsibilities, and accountability of the Securities Board, NEPSE, and CDSC, and present it to the Federal Parliament.
Before allowing companies to issue primary shares (IPOs), the committee has directed mandatory grading and prioritization based on financial indicators such as capital adequacy, technology, net worth, and balance sheet returns. Similarly, in view of the tendency of promoter shareholders to sell shares and exit the secondary market and the risks it poses, the Securities Board has been instructed to review the existing provisions regarding the share ownership that promoters must hold.
The committee has emphasized accelerating the restructuring of the Nepal Stock Exchange. Concluding that periodic disruptions in NEPSE's online trading system (NOTS) and data system have caused direct losses to investors and government revenue, the committee has directed immediate upgrading of the system. Additionally, the Ministry of Finance, the Securities Board, and NEPSE have been cautioned to ensure the highest level of cybersecurity in the trading system.
The committee has directed strict measures to control unhealthy manipulation in the secondary market. It has called for intensive monitoring and surveillance of the market to prevent collusive trading, artificially controlling share supply to create scarcity, and creating artificial demand and prices to sell shares at high prices (cornering, circular trading, pump-and-dump). The Securities Board and NEPSE have been instructed to identify individuals or companies involved in such illegal activities and bring them under immediate necessary action.
The committee has concluded that the long-standing vacancy of the Chief Executive Officer (CEO) position at NEPSE and CDS and Clearing Limited (CDSC), the two main infrastructures of the capital market, has affected institutional performance and the reform process. The Ministry of Finance has been directed to immediately proceed with appointments through an open and transparent process to end the leadership vacuum at both institutions.