Kathmandu. Not all investors will be able to avail margin loan transaction facility in the stock market.
The Securities Board of Nepal (SEBON) is going to tighten the margin loan transaction facility that investors can get from share brokers through the Margin Credit Transaction Regulation. Evaluating the risks involved in share trading, the regulations have set new criteria for investors to avail margin loan transactions.
Now, the licensed margin lending institution should provide this facility only to the customers who have completed customer identification, customer financial capacity, investment objectives and risk bearing capacity.
This facility will be available only to the persons and institutions who are eligible to transact in accordance with the securities and prevailing laws and other persons and institutions fulfilling the qualifications specified by the Securities Board.
Similarly, the regulation has made it mandatory for the margin lending institution to evaluate the suitability of the customer before providing margin loan facility.
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- Client’s Income and Asset Status,
- Investing Experience,
- Knowledge of the stock market,
- Risk-bearing capacity,
- Investment Objective,
- Debt Payment Capacity,
- Other grounds prescribed by the Securities Board.
– Who does not get margin loan facility?
- Person disqualified from trading securities in accordance with applicable law,
- Not blacklisted in Credit Information Center’s Credit Information Report,
- Customer who has committed a serious material default of margin loan and has been disqualified for a specified period,
- High-risk or restricted customers under anti-money laundering laws,
- A person or entity designated as disqualified by the Securities Board on grounds of public interest or market stability,
- A person or organization who has not completed 5 years of conviction for a securities offense.
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SEBON has sought suggestions from stakeholders on the draft of the regulation. Sebon said the regulations will be implemented only after studying the suggestions received.
