PM issues an order to halt issuance of new license for the next stock exchange

KATHMANDU: After protests against granting stock exchange license to particular business houses, Prime Minister Pushpa Kamal Dahal issued instructions to halt the process.

The source claims that Dahal instructed the Chief Secretary, the Law Secretary, and representatives of the Securities Board of Nepal to halt the license distribution procedure.

The distribution of licenses to stock exchanges for private investments, according to Baluwatar officials, will cause economic manipulation and have a negative effect.

There was a claim that the Securities Board was carrying out the license-granting process in a “middleman’s setting.”. The House of Representatives also discussed this matter.

An official close to the prime minister revealed, “There is a plan to cancel the new license distribution process. The prime minister has given instructions to stop the process, saying that it is not appropriate to distribute new licenses to the private sector despite the presence of the Government Stock Exchange (NEPSE). “.

The Securities Board made policy arrangements and started the license distribution process for the distribution of licenses for private stock exchanges. When Janardan Sharma was the Finance Minister and Sher Bahadur Deuba was the Prime Minister, the procedure for distributing new licenses began.

The process of preparing to grant the private sector a stock exchange license is moving forward, say the officials, thanks to a significant fundraising effort led by the contentious businessman. Institutional corruption existed in the license distribution procedure, and the Securities Board amended the “Securities Market Operation Regulations, 064”, which prohibited private limited companies from investing in the stock market, in violation of prior practice and international standards.

In the past, the securities market was restricted to investments from banks, financial institutions, securities dealers, and listed companies. Stock exchange investments were not allowed for private limited companies.

No company or organization may own more than 10% of the total share capital of the securities market, as per the previous clause. The board’s decision to raise the stock exchange investment cap to 15% is inconsistent with international standards.

Only 7 percent of a company’s total investment can be made in the stock market in almost every nation in the world. There was a contentious discussion in Nepal regarding raising the investment cap for stock exchange transactions. Board chairman Ramesh Kumar Hamal has voluntarily changed half a dozen policies while pretending to be in charge, according to experts.

Banks, other financial institutions, and insurance companies are where the majority of business houses have investments. Conflict of interest arises when one person holds both a banker and a businessman title. The National Bank has argued that bankers and traders should be kept apart for this reason.

However, no policy decision regarding the separation of bankers and businessmen has yet been made because of the high-level political “connection” of private businessmen. Experts concurred that it would be detrimental in the long run if the Securities Board changed the rules to allow business houses to participate in the stock market.

They claim that since exchange companies are merging all over the world, there is no justification for Nepal to add. In India, where there are 1 point 38 billion people, there are only 2 exchange companies.

The Supreme Court issued a writ that temporarily halted the distribution of new stock exchange licenses. The Supreme Court dismissed the writ, and the board continued the procedure. The license has been requested by the Himalayan Stock Exchange, National Stock Exchange of Nepal, and Annapurna Stock Exchange Limited. All businesses have significant investments from business houses.

The board was only prepared to license one company out of the applications it received. The board had established an evaluation committee for that purpose. The committee has reportedly completed its evaluation process, according to sources.

The Securities Board has already begun distributing licenses to securities brokers in the interim. 29 brokers had already received letters of intent as of Thursday. Also prepared to receive licenses soon were the others. For a new broker license, there are 45 applications—3 for the stock market and 4 for the commodity exchange.

On August 31 of last year, the Finance Committee of the Federal Parliament wrote a letter to the Ministry of Finance, the Securities Board, and NEPSE requesting information regarding the justification for distributing stock exchange and broker licenses.

The board disregarded the directive and, on October 2, after the then-Parliament’s term had ended, issued notices to distribute licenses for a large number of brokers, one stock exchange, and two commodity exchanges all at once. Concerning the deadline for submitting a new license application, a case was also brought before the Patan High Court.

Asserting that the MPs have been calling for its termination. Instead of issuing a new license, they believed that the government-owned Nepal Stock Exchange (NEPSE) should be modernized and expanded to include the private sector during the House of Representatives meeting and public event.

Fiscal Nepal |
Friday May 12, 2023, 11:14:45 AM |

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