4 issue managers likely to face Sebon actionThe Securities Board of Nepal (Sebon) is mulling to take action against four issue managers for mutual fund schemes on the charge of violating their investment portfolio regulations.
The Securities Board of Nepal (Sebon) is mulling to take action against four issue managers for mutual fund schemes on the charge of violating their investment portfolio regulations.
Issue managers CBIL Capital, NMB Capital, Laxmi Capital Market and NIC Asia Capital have put more than 10 percent of the funds collected through mutual fund schemes in fixed deposit accounts at various banks and financial institutions, according to Sebon.
As per the Mutual Fund Regulations 2010, issue managers are barred from depositing more than 10 percent of the money collected through mutual fund schemes in banks.
The four companies face action by the stock market regulator for contravening the rules when acting as issue managers for mutual fund schemes launched by Citizen Mutual Fund, NMB Mutual Fund, Laxmi Mutual Fund and NIC Asia Mutual Fund.
CBIL Capital is the issue manager for Citizen Mutual Fund-1, NMB Capital is the issue manager for NMB Sulav Investment Fund-1 and NMB Hybrid Fund-1, Laxmi Capital Market is the issue manager for Laxmi Equity Fund and Laxmi Value Fund-1, and NIC Asia Capital is the issue manager for NIC Asia Growth Fund.
Sebon’s deputy spokesperson Niranjaya Ghimire said the regulator had given the issue managers 15 days to appear with clarifications. According to him, they face penalties ranging from fines to the cancellation of the schemes if they do not come up with a good explanation.
A total of 10 mutual funds have received operating licences so far. They have launched 14 schemes to mobilise savings collected from the general people. According to Sebon, the schemes have a maturity period of seven years.
A mutual fund is a portfolio management company which helps investors lacking knowledge about the capital market by collecting money from them and investing it in various instruments of the capital market. These companies can invest in government securities such as debentures, treasury bills and bonds besides securities registered at Sebon and bank deposits, among others.
In a bid to inject more money in the stock market, the government has permitted mutual funds to collect money from investors who want to gain by investing in the capital market. “However, depositing excess money in banks might not fulfill the government’s objective of enhancing the stock market,” Ghimire said.
Mutual funds have been expanding their business of late. According to Sebon, these companies mobilised funds worth Rs4.8 billion in fiscal 2017-18 by issuing various schemes. The money collected from mutual fund schemes stood at Rs4.25 billion in 2016-17.
Meanwhile, Sebon has stopped issuing licences to new merchant bankers. There are currently 25 merchant bankers in the country. “The regulator has decided not to permit new companies as there are an adequate number of merchant bankers operating in the country,” Ghimire said.
As per the existing rules, merchant bankers can operate as sales and issue manager, underwriter, share registrar, investment consultant and investment manager. Among the 25 merchant bankers, only six have received licences to operate in all of these areas.
Laxmi Capital Market
NIC Asia Capital