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1
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: [email protected]
Ph no: 0977-1-5541057
Financial System in Nepal
2
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
3
Securities Market Related
Authorities
4
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
5
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
6
7
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.
8
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.
9
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.
10
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.
11
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.
12
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
13
14
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.
15
Thank You !