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GLOPAC Fellowship Program 4 April – 22 June ,2018

Overview of Nepalese Securities Market

Presented by:

Ambika Prasad GiriDeputy Director

Securities Board of NepalJawalakhel, Lalitpur, Nepal.

Website: www.sebon.gov.np

Email: support@sebon.gov.np

Ph no: 0977-1-5541057

Financial System in Nepal

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Financial

System in

Nepal

Banks &

FIs

(188)

Class A (28)

Class B(39)

Class C (27)

Class D (54)

Saving & Credit

Cooperatives

Licensed by NRB (15)

NGOs permitted for

limited banking

transactions (25)

Capital

Markets

(409)

Stock Exchange (1)

Listed Cos (192)

Merchant Bankers

(24)

Mutual Funds (9)

Stockbrokers (50)

CSD (1)

CRA (2)

DPs (68)

ASBA Member 62

Insurance

(35)

Life

Insurance

(17)

Non-life

Insurance

(17)

Reinsurance

(1)

Non-banking

financial

Institutions

(3)

Employees

Provident Fund (1)

Citizen Investment

Trust (1)

Deposit Insurance

& Credit Guarantee

Fund (1)

Cooperatives

(13769)

Saving &

Credit

Cooperatives

(13769)

A Glimpse of Nepalese

Economy

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Securities Market Related

Authorities

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Central Bank of Nepal

Institute of

Chartered

Accountants of Nepal

Accounting &

Auditing

Standard Board

Government of Nepal

Ministry of Finance

Insurance

Board of Nepal

Company

Registrar’s Office

Bank and

Financial Institutions

Insurance Company

Member(CAs and

Registered Auditors)

All

Corporate Body

Securities Board of Nepal

Stock Exchange, CDS

Merchant Bankers

Stock Brokers

Listed Companies

Mutual Funds

Credit Rating

DP and ASBA Member

Securities Market Related

Authorities…

The Ministry of Finance

Reporting ministry of SEBON

Appoints chairman of SEBON and has representation in its governing board

Approves securities regulations proposed by SEBON

Securities Board of Nepal (SEBON)

Authority to supervise and inspect the stock exchange, Securities Business

Persons and listed companies

Can take legal actions in case of noncompliance, and the actions can be warning,

monetary fines or suspension or cancellation of license

Stock Exchange

Authority to supervise and inspect its members

Can suspend or cancel membership

Enforce listed companies as per its listing rules

Forwards cases to SEBON

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Securities Market Related

Authorities…

Central Bank has representation in SEBON’s governing board

Insurance Board: Regulator of Insurance sector

ICAN: regulates its member chartered accountants and auditors, and also has

representation in SEBON’s governing board

Accounting and auditing standard boards develops standards and SEBON represents

in accounting standard board

The Company Registrar's Office (CRO)

Administrative authority of Companies Act

Authority for registration of all companies

Under the Ministry of Commerce and Industries

Coordination Committee:

High level committee under the convenership of Ministry of Finance

Representation from SEBON, central bank, CRO, Insurance Board and the Stock exchange

Discusses on common regulatory issues and forwards direction to these regulatory authorities

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Features of Nepalese Capital Market

Dominated by bank and financial institutions (BFIs), more than 80

% listed companies are BFIs.

Around 95% equities are being traded and remaining are mutual

funds unit and corporate bonds are traded in stock market this

reflect the dominance of equities.

Only domestic companies are listed in stock market and no cross

border listing has been made.

Mutual Funds are working as a institutional investor lacking real

institutional investor.

Stock market has not been fully modernized.

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Introduction of Securities Board of Nepal

(SEBON)

SEBON EstablishmentSEBON was established in AD 1993 as an apex

regulatory body .

SEBON has received membership (associate) of the

International Organization of Securities Commissions

(IOSCO) in 2016.

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Introduction SEBON (contd…)

Objectives: SEBON's three pillar objectives are;

To protect investor’s interest ,

To develop capital market for the economic growth of the nation,

To maintaining the securities market by regulating and

monitoring .

Major Responsibilities of SEBON

To provide advice to government on securities market.

Issue necessary securities regulations and directives.

To approve the bye-laws of stock exchange and business

persons.

To arrange the activities for protecting of investor's interest.

Discharge or make arrangements for discharging such other

functions as are necessary for the development of the capital

market.

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Governing Board and Structure of SEBON

Governing Board: As per provision of the Securities Act, 2006

the Governing Board of the SEBON is comprised of 7

members. Chairman: Appointed by the government from amongst the renowned persons of

capital market experts.

Joint Secretary, Ministry of finance,

Joint Secretary, ministry of law, justice and parliamentary affairs,

Executive Director (Representative), Central Bank,

Vice Chairman (Representative), Institute of Chartered Accountants of Nepal,

Vice Chairman (Representative), Federation of Nepalese chambers of commerce and

industries,

One expert Member,

Organization: Departments -2 (Headed by Executive Directors)

Divisions-6 (Headed by Directors)

Sections-12

Sub sections-25

There are 52 staffs at present.

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Legal structure:

The prevailing laws relating to securities market to

protect the interest of the general investor in securities

market and to operate and systematize stock

exchange, central securities depository service, mutual

fund and securities business.

Act: Securities Act, 2006, Commodities Act, 2017

Other related Act: Company Act, 2006

Asset (Money) Laundering Prevention Act, 2008.

Regulations- There are 8 regulations

Guidelines and Bylaws- There are 9 guidelines and bylaws.

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Market Participants at a glance(Under Direct and Indirect Jurisdiction)

As the scope of Securities market has been rapidly increasing, SEBON

has currently been regulating and supervising the following 409 market

participants:

Stock Exchange: 1 ( Nepal Stock Exchange Ltd.)

CDS and Clearing:1 (CDS and Clearing Ltd.)

Stock Brokers:50

Merchant Bankers:24

Crediting Rating Agency:2

Mutual Funds:9

Listed Companies:192

Depository Participants: 68

ASBA Members: 62

Major Indicators of Nepalese

Securities Market

S.N. Particular UnitFY

2014/15

FY

2015/16

FY

2016/17

Percentage Change

FY

2015/16

FY

2016/17

1 No. of Public Offerings No. 48 55 101 14.9 83.6

2Amount of Public Offerings

USD in

Million 138.8 182.6 571.1 31.6 212.8

3 No. of Listed Companies No. 232 229 208 -1.3 -9.2

4Turnover

USD in

Million 629.1 1583.2 1971.3 151.7 24.5

5Market Capitalisation

USD in

Million 9513.5 18174.3 17825.2 91.0 -1.9

6 Turnover to Market

Capitalisation

%6.6 8.7 11.1 31.8 27.6

7Market Capitalisation to GDP

%46.5 84.1 71.4 80.9 -15.1

8 NEPSE Index Points 961.23 1718.15 1582.67 78.7 -7.9

9 NEPSE Float Index Points 68.47 125.41 116.14 83.16 -7.39

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Major Challenges of SEBON and

Securities Market

Only Rule Based Supervision for market participants.

Low participation of real sector companies and dominance

of Banks and Financial institutions ( BFIs).

Structural & Institutional Reform of Nepal Stock Exchange

and CDS.

Obtaining operational autonomy through enhanced

regulatory, supervisory capacity and organizational

efficiency of SEBON.

Effective enforcement on insider information leakages/

insider trading.

Introducing a single identification to the investor in order to

minimize market frauds and offences.

Regulating highly technical commodity market.

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Thank You !