Finance Ministry directs SEBON to resolve dispute over separate identification of promoter and public shares

KATHMANDU: The Ministry of Finance has stepped in to address the growing dispute over the proposal to assign separate International Securities Identification Numbers (ISINs) for promoter and public shares, directing the Securities Board of Nepal (SEBON) to resolve the issue in consultation with relevant stakeholders.

The controversy erupted after CDS and Clearing Limited (CDSC) introduced a draft operational directive proposing separate ISINs for promoter and ordinary shares across all companies, not just banks and insurance firms. The move has faced strong opposition from promoter shareholders and private sector associations, who argue the system contradicts international practices and could negatively affect investor confidence and capital expansion efforts.

Following increasing backlash from organizations like the Independent Power Producers’ Association, Nepal (IPPAN) and the Nepal Chamber of Commerce, Finance Minister Bishnu Prasad Paudel instructed Finance Secretary Dhaniram Upadhyay and Revenue Secretary Dinesh Kumar Ghimire to gather facts and hold a high-level discussion. Subsequently, on Monday, the Ministry called a meeting with SEBON Chair Santosh Narayan Shrestha, NEPSE CEO Chudamani Chaulagain, and CDSC Managing Director Pravin Pandey.

Although Minister Paudel did not attend the meeting, the two secretaries led the discussion, during which CDSC defended the proposed directive, stating it aims to enhance transparency and organization in the capital market. NEPSE’s CEO echoed this, adding that the separation would help correct market distortions.

SEBON Chair Shrestha noted the directive is still under review and assured an appropriate decision will be made based on its implications for market transparency, international best practices, and investor asset protection.

A source at the Ministry stated, “We’ve instructed SEBON to take the lead in resolving the issue and to recommend a course that ensures good governance and safeguards the interests of the market, investors, and companies.”

Opponents argue that the dual ISIN system could freeze promoter shares worth over NPR 128 billion, particularly affecting sectors like hydropower and manufacturing, which have so far been issued a single ISIN. They claim this could deteriorate the investment climate and create unnecessary regulatory barriers.

Currently, only banks and insurance companies have separate ISINs for promoter and public shares. In other sectors, both share types are grouped under a single ISIN. Even within this single ISIN system, promoter shares are locked for three years post-IPO and remain restricted from trading, whereas public shares are freely tradable. After the lock-in period, promoter shares automatically become tradable without needing reclassification.

The draft directive, now under SEBON’s review, proposes mandatory classification and issuance of separate ISINs for promoter and public shares, in line with companies’ articles of association. If approved, it would significantly alter how the capital market operates in Nepal.

As the capital market in Nepal remains in a developing phase, stakeholders argue that changes of this scale must be made with extreme caution, ensuring alignment with both domestic realities and international norms.