Stockbrokers who were reluctant to open branches outside the Kathmandu Valley until a few days ago have been rushing to open new branches after the government indicated that commercial banks could be issued brokering licence. 

Nearly 25 brokers have applied at the Securities Board of Nepal (SEBON) seeking permission to extend their branches in 200 locations across the countries. “Except the rural areas, where there is no access of internet, the brokering companies have targeted to set up new branches all over Nepal,” said Sebon officials. 

Following the Finance Ministry’s instruction, SEBON has asked the Nepal Stock Exchange (NEPSE) and CDS and Clearing to make necessary preparations to issue brokering licences to the commercial banks. Implementing the recommendations submitted by the panel formed to study problems in the money and capital markets last month, the ministry had asked the regulator to enforce the provision. 

According to Nepal Rastra Bank (NRB) officials, four commercial banks, including NMB Bank and NIC Asia Bank, have applied for the licence to work on stocks transaction similar to the brokering companies.  

The NRB through the monetary policy 2018-19 has also provisioned the commercial banks to operate as the stock brokers by opening the subsidiary companies. However, the stockbrokers are against the central bank’s move, stating that the provision would promote the anomalies such as ‘insider trading.’

Amid the stockbrokers’ rush to open new branches, SEBON said it might not be able to issue licences to open such a overwhelming number of branches. The regulator said it was revisiting the Securities Businessperson Regulation 2008 that would review the provision for the new brokering licence.  

“The new regulation will set the standards on the capital requirement, manpower, work space, risk management and other logistical requirements to open the new brokering firms,” said a souce at SEBON. “The regulator is considering raising the paid up capital of such firms to Rs50 million from the existing Rs10 million.”

There are 50 brokering companies in operation. These companies are operating 41 remote work stations in major commercial towns such as Pokhara, Biratnagar, Dharan, Baglung, Beshishar, Nepalgunj, Birtamode, Birgunj and Hetauda. NEPSE had permitted brokerage firms to open branches outside the Valley two years ago.

Earlier, SEBON itself had asked the brokers to expand their branches in the areas outside the Capital. However, brokers were reluctant over the Sebon’s direction, stating that they were facing financial losses in those locations. According to Stock Brokers Association of Nepal, these locations hardly make out 10 percent of the total transaction volume. 

“We sought for opening the new branches not because of the possible penetration of commercial banks, but with the implementation of the automated online trading platform that facilitate the stocks trading from distant places,” said a stockbroker on condition of anonymity.

SEBON commits to impose PAN

The Securities Board of Nepal has repeated its commitment to impose Permanent Account Number (PAN) on share transaction on the secondary market. The regulator’s statement comes at the time when the investors are putting pressure on the authority to annul the provision.

“We have assured the investors that PAN card system will streamline the shares transaction along with developing the financial literacy among them,” the board said in a statement. “It has urged the investors not to go after the rumours against the

system.”

The move is not to create additional troubles to the investors, instead it would help develop financial literacy among the investors, said Niranjaya Ghimire, deputy spokesperson for the board.

The government through the budget announcement for 2018-19 has planned enforcing PAN mandatory for the investors. SEBON in October asked NEPSE and CDS and Clearing to make necessary preparations to enforce PAN to the effect from mid-April—the beginning of Nepali New Year.  

However, the investors launched protest against the government’s move last week, arguing that the provision would affect the small investors.