SEBON suspends Bhrikuti Stock Broking Company over unauthorized credit-based share transfers

KATHMANDU: Nepal’s capital market regulator, Securities Board of Nepal, has taken stringent action against Bhrikuti Stock Broking Company, suspending its operations for three months after uncovering serious violations of securities trading regulations.

The decision was made during a board meeting on Monday after an investigation found that the broker had been transferring shares to clients without receiving payment, a practice that directly contravenes the Securities Act.

Unauthorized Credit Trading Exposed

According to SEBON sources, the broker—registered as Broker No. 55—facilitated share purchases on credit by transferring ownership of shares to clients before settlement. The regulator has also decided to impose financial penalties under Section 88 of the law and seek formal clarification from the company’s management and board of directors.

At the center of the case is businessman Dipak Bhatt, who purchased shares of Nepal Reinsurance Company but reportedly failed to make payment. Despite this, the broker transferred the shares into his name—raising serious concerns about compliance failures and internal controls.

Further investigation revealed that the mandatory 25 percent collateral requirement for share transactions was not enforced, indicating systemic breaches in risk management practices.

Broader Irregularities in Institutional Trades

SEBON’s probe also uncovered large outstanding dues linked to transactions involving multiple institutional investors, including:

• Himalayan Reinsurance Company
• Himalayan Large Cap Fund
• Himalayan Securities Banker
• Nepal Life Insurance
• Nepal Micro Insurance

The regulator noted that significant unpaid settlement amounts had accumulated over time, suggesting prolonged non-compliance rather than isolated incidents.

Ownership Links Raise Governance Questions

The broker is reportedly linked to Manoj Kumar Lal Karn, former CEO of Himalayan Life Insurance, with major shareholding held by his spouse Sudha Karn. These connections are likely to intensify scrutiny over governance standards and conflict-of-interest risks within Nepal’s financial ecosystem.

Market Impact and Regulatory Signal

Market analysts view SEBON’s action as a strong regulatory signal aimed at tightening discipline in Nepal’s secondary market, particularly amid rising concerns over leveraged and opaque trading practices.

The मामला also raises broader questions about settlement integrity, broker oversight, and enforcement consistency in Nepal’s capital markets.

Shareholding Patterns Under Spotlight

Data from Magh 5 shows that Nepal Reinsurance Company shares are widely distributed among institutional and individual investors:

• Himalayan Life Insurance holds 3.02 million shares
• Dipak Bhatt holds 1.94 million shares
• Himalayan Large Cap Fund holds over 340,000 shares
• Bhrikuti Stock Broking Company holds approximately 22,000 shares

Investigators have also identified indirect shareholdings linked to individuals and entities close to Bhatt, further complicating the transaction trail.

Enforcement Phase Intensifies

The three-month suspension is expected to disrupt operations of the broker and affect its clients, while the case could potentially escalate into broader enforcement actions depending on findings from ongoing inquiries.

Regulators are increasingly under pressure to enhance transparency, enforce collateral discipline, and prevent systemic risks in Nepal’s evolving capital market landscape.