Kathmandu. The Securities Board of Nepal (SEBON) has implemented a business consolidation policy for stock brokers.
Clause No. 3 of the ‘Capital Market Strengthening and Revival Action Plan, 2083’ issued by the Ministry of Finance on September 12, 2083. Clause 3 states that the Securities Board of India shall immediately make public the ‘Institutional Reform and Strengthening Policy of Securities Broker Business’. Accordingly, the Securities Board of India (SEBON) has promulgated the ‘Securities Broker Business Strengthening Policy, 2083’ with the objective of developing the securities broker business as a market intermediary capable of providing adequate capital, business management, modern technology, strong risk management and diversified securities related services.
The main vision of this policy is ‘development of strong, institutional and competitive securities brokers based on strong capital, business governance, modern technology, effective risk management, fair market conduct and high customer protection’, the Securities Board has made it clear. According to the policy, securities brokers are classified into 4 categories on the basis of capital, risk bearing capacity, service diversification and institutional capacity. Category ‘A’ will be a stock dealer, ‘B’ will be a full-service stock broker, ‘C’ will be a trading stock broker and ‘D’ will be a specialized stock broker.
The policy has made provisions for separate approvals for activities such as margin trading, securities lending and lending, short selling, intraday trading and market makers.
Similarly, customer complaint management, investor compensation fund and providing daily or real-time details to clients have also been incorporated in the policy.
The policy provides for risk-based capital adequacy with minimum paid-up capital of brokers. On the technology and cyber security side, it has been proposed to make digital KYC, multi-factor authentication, order and risk management system, cyber security infrastructure, regular IT and penetration testing mandatory.
Similarly, a policy has been adopted to facilitate mergers, acquisitions and business integration in brokerage business. The process of gap assessment, compliance plan, capital and technology upgradation and reclassification will be initiated by giving a transitional period to bring the existing brokers to the new standard.
According to the Securities Board of Nepal (SEBON), the policy will be implemented gradually according to three phases: institutional strengthening, expansion of market services and development of integrated securities intermediary system.
