The allegations of insider trading labelled against the Securities Board of Nepal Chairperson Bhisma Raj Dhungana and Nepal Stock Exchange Chief Executive Officer Chandra Singh Saud have come as bad news right when the stock market is riding the bull and investors are excited. Dhungana's daughter, Rebika Dhungana, and Saud's wife, Sushila Kumari Bohora, are reported to have purchased 11,911 shares each of Sarbottam Cement, which is preparing to make an initial public offering through the book building method after it was registered as a public limited company.

The Commission for Investigation of Abuse of Authority has launched an investigation into the allegations, and it will be some time before we see the merit of the allegations. But the recent episode is certain to prove detrimental to the trust investors have put in the Board and the Exchange. What is more, this is not the first time allegations of insider trading have surfaced, leading to panic among investors at a time when the share market has been showing a bullish trend at an unprecedented scale.

In June, the Securities Board publicised a list of 51 companies trading on the Stock Exchange that it suspected had engaged in irregular trading practices, including insider trading and cornering. This was followed by a landslide in the share market, pushing investors, especially new ones, out of the market altogether, owing to the mistrust the episode generated. Experts were quick to question the sweeping generalisation made by the Board, as the list created panic among investors. Before that, the Exchange Board had investigated alleged insider trading in the shares of Ajod Insurance Limited right before it was set to announce 50 percent right shares to investors. As expected, investors were quick to run away from the company, leaving those who had purchased its shares at a higher price high and dry.

Insider trading is no new phenomenon in Nepal. Such episodes are detrimental to the health of the capital market, as it creates mistrust among investors. Under the securities exchange regulations, an insider could be anyone, including an employee of a company or a legal counsel or staff of stock exchanges or anyone who has intricate knowledge of the goings-on in companies listed on the Stock Exchange. This happens when the insiders are bereft of the fundamental principle of being in a responsible position that affects many others' lives and the lack of strict laws that punish and bar the stock market criminals from remaining in the market.

Insider trading gives undue advantage to the wrongdoers, whereas genuine investors who have spent their energy studying the company's financial situation and invested their hard-earned money carefully end up making a loss and exiting the market altogether. The recent controversies have raised moral questions against the officials expected to maintain utmost integrity and secrecy. Authorities should complete the investigation at the earliest and punish the officials as per existing laws, if found guilty, so that investors regain their trust in the stock market.