This article explores the concerns of investors regarding a new policy by the Securities Board of Nepal that mandates a 15-day notice before selling shares for fundamental shareholders, which is allegedly hindering market performance.
The Rescue Plan Disappointment
After the Finance Ministry unveiled a 21-point rescue plan for the capital market, many investors and brokers felt hopeful. The government reduced the capital gains tax and eased rules for institutional and non-resident investors. Even with these positive changes, the share market has not stopped falling. Many experts now believe the cause is a specific policy introduced by the Securities Board of Nepal (SEBON), which some compare to the controversial 4/12 crore loan cap policy of the past.
Understanding the New Policy
The SEBON policy requires fundamental shareholders to notify their company 15 days in advance before selling 5 percent or more of their holdings. This company must then make the information public through NEPSE. A fundamental shareholder is defined as someone holding 1 percent or more of a company with paid-up capital over 25 crore, or 5 percent for smaller companies. For a company with 2 arba paid-up capital, owning 2 lakh units makes an investor a fundamental shareholder. Selling even 10,000 units requires this lengthy public notice process.
The Impact on Investors
This rule does not just affect company founders or promoters. Any regular investor who buys a large number of shares from the secondary market also falls under this category. Investors are discouraged because they may not want their selling plans to be public knowledge for two weeks. Because of this, big investors are becoming afraid to buy large quantities of shares in the first place. If they know they cannot exit their positions easily without a 15-day wait, they simply prefer not to invest.
Global Comparison and Future Outlook
While other countries like India, Singapore, and the United States have disclosure requirements for large shareholders, they do not usually force a 15-day wait period before a sale. In Nepal, the strict application of this rule to all large investors is creating a barrier. Experts suggest that the government should reconsider this 1 percent threshold and perhaps raise it to 5 percent or higher to match international standards. There is a need to balance market transparency with the ability for large investors to move their money freely, as a market without big players lacks the depth needed for growth.
AI Disclaimer: This article was originally published on https://bajarkochirfar.com. It has been translated with the help of AI. For the best understanding and accurate facts, we recommend reading the original Nepali version.
