Bill to amend Securities Act, 2063 BS registered in parliament

Kathmandu- A bill designed to amend the Securities Act, 2063 has been registered in the Federal Parliament. Finance Minister Bishnu Prasad Paudel had registered the bill in Parliament last Friday.

The Council of Ministers had on July 1 given its approval for registering this bill in the Federal Parliament. The government introduced this bill stating that it has been long time since the existing Securities Act has come into force and it was necessary to make timely amendments and revisions in the existing legal framework by rendering the regulatory body and the work of regulation more effective in tune with the changes that have come in the capital market.

The Ministry of Finance has stated that the draft of the bill has been prepared in participation of and consultation with the stakeholder bodies and it has been registered in the Parliament as it is deemed necessary to make timely changes in the existing legal system for ensuring a systematic issuance and transaction of shares and for effective regulation of the share market.

The Securities Act, 2063 is currently in implementation for mobilization of capital and development of the capital market, and for works ranging from protecting the interests of investors and regulating the capital market. Nepal Securities Board established as per this Act has been carrying out works like systematizing as well as regulating the issuance of share of incorporated companies and their trading.

The bill has made a provision on putting in place a compensatory fund to protect investors from possible damage due to the systemic or other structural risks associated with share trading. Similarly, prior-permission from the Board has been proposed to establish an organised institution to operate the Central Depository Service. This service has been defined as a service for the dematerialization of securities of organised entities through digital means and for maintaining the central archiving of such securities.

The Bill has also the provision of Derivatives Market as well. Derivatives are meant to be understood as financial instruments such as derivatives contracts (forward, options, futures, and swaps) meant for trading in the securities market after a period of 30 days being based on listed securities or their prices or indices. The Bill has also incorporated the provision of operating the Specialized Investment Fund that means any Private Equity Fund, Venture Capital Fund, Hedge Fund or other funds of a similar nature registered in the Board.

The Bill proposes provisions for setting limits on margin trading in securities, interest charges on those margins, and other regulations related to margin transactions. It has excluded the existing provision of including a representative from the Federation of Nepalese Chamber of Commerce and one as the expert member in the Board. It has proposed the authority to the Board to open its provincial branch, advising new provisions regarding the appointment procedures of Securities trustee, qualifications, duties, responsibilities and jurisdictions.

The existing relevant act does not have the provision of a trustee. It is stated that the provision of a trustee aims to promote interest of beneficiaries or investors, and to further systematize the capital market making is more secured. It also warrants people serving as Chairperson, Executive Director, and Deputy Executive Directors of the Board ineligible for working for any organization that has been authorized by the Board after their retirement or removal from their positions.