Stock Broker Business Strengthening Policy Implemented, Proposal to Classify into Four Categories
The Nepal Securities Board has implemented the new Strengthening Policy, 2083, to make stock brokerage businesses institutional and competitive. The policy proposes classifying brokers into four categories based on capital, risk-bearing capacity, service diversification, and institutional capacity.
The Nepal Securities Board has implemented the Business Strengthening Policy, 2083 for securities brokers (stock brokers). Point No. 3 of the 'Capital Market Strengthening and Revival Action Plan, 2083' issued by the Ministry of Finance on Bhadra 29 stated that the Securities Board would immediately publish the institutional reform and strengthening policy for brokerage businesses. Accordingly, the Board has introduced this policy.
The Board has clarified that the core vision of the policy is 'the development of strong, institutional, and competitive securities brokers based on sound capital, professional governance, modern technology, effective risk management, fair market conduct, and high-level customer protection.'
According to the policy, brokers are classified into four categories based on capital, risk-bearing capacity, service diversification, and institutional capacity:
- Category 'A': Stock Dealer
- Category 'B': Full Service Stock Broker
- Category 'C': Trading Stock Broker
- Category 'D': Specialized Stock Broker
The policy requires separate approval for activities such as margin trading, securities lending and borrowing, short selling, intraday trading, and market making.
Likewise, the policy also covers customer grievance management, investor compensation fund, providing daily or real-time statements to customers, and a resolution framework for distressed brokers.
Brokers must maintain minimum paid-up capital along with risk-based capital adequacy. In technology and cyber security, the policy proposes making digital KYC, multi-factor authentication, order and risk management systems, cyber security infrastructure, regular IT audits, and penetration testing mandatory.
Additionally, the policy aims to facilitate merger, acquisition, and business integration in brokerage businesses. A transition period will be given to bring existing brokers to the new standards, and the process of gap assessment, compliance plan, capital and technology upgrading, and reclassification will be advanced.
The policy will be implemented in three phases: institutional strengthening, market service expansion, and development of an integrated securities intermediation system.