NEPSE Introduces Approval for Family Stock Transactions

NEPSE has proposed several significant changes in its Securities Traders (Securities Brokers, Securities Dealers) Membership and Supervision Regulations 2080, which have been approved by the Board of Directors of NEPSE.

One of the key proposals is that stockbrokers, if intending to buy and sell securities of a company in their name or on behalf of their family, must obtain prior approval from NEPSE. Furthermore, the regulations state that a member of a stockbroker's family can only engage in buying or selling shares through another member trader when dealing in shares.

In these newly approved regulations, NEPSE has introduced a requirement for businessmen who are members of NEPSE to promptly provide details of share purchases and sales conducted in their company's name, as well as those involving shareholders and their families. Even if a subscribed businessman prohibits the purchase or sale of securities from his own company, stock dealers will still be allowed to buy and sell securities in the company's name.

These regulatory amendments are aimed at holding stockbrokers accountable. NEPSE has the authority to suspend a stockbroker if the member receives more than two notices or written warnings in a single financial year, fails to adhere to notice and information requirements as per securities laws, or attempts to manipulate securities prices in an abnormal manner.

Non-compliance with approved software and terminals, as well as failure to follow NEPSE's orders and instructions, can also result in suspension for stockbrokers.

Additionally, a stockbroker's membership can be suspended if a supervision report reveals potential harm to investors, damage to the trading system, market distortion, or other justifiable reasons for suspension. However, NEPSE will provide the concerned member an opportunity to submit an explanation and reasons before suspending their membership.

If the explanation provided by the member is unsatisfactory or if they are found to have acted against the law, rules, regulations, or code of conduct, NEPSE can suspend their membership for a minimum of 15 days.

In contrast to the previously implemented regulations, these amendments now specify a 3-month period for the broker to submit a clarification. During this period, if NEPSE deems it inappropriate for the organization to continue business operations, they can suspend it.

Furthermore, if the company's explanation is found unsatisfactory, NEPSE has the authority to cancel the membership.

The regulations also emphasize a code of conduct for stockbrokers. Among the stipulations, stockbrokers are prohibited from providing unauthorized access to the transaction management system for clients. If a customer gains unauthorized access or engages in illegal activities that impact the market, their transaction account must be closed immediately, with NEPSE informed accordingly.

The regulations also require that customer funds be handled with care. Funds should be paid to customers via the banking system, with only specified amounts collected from customers. Deposit amounts or interest/dividends received from customer investments must not be used for personal or business purposes.

Confidential customer information should not be published or misused, advertisements that create confusion for investors and negatively impact the securities market should be avoided, and customers should be promptly paid after transactions are completed. Brokers are prohibited from exceeding the maximum number of shares allowed by relevant listed company securities regulations, and funds should not be used elsewhere or for personal gain.

Market manipulation, including creating a false market or artificially influencing supply and demand, is strictly prohibited. This includes tampering with the trading system, causing abnormal price fluctuations, engaging in fraudulent transactions, insider trading, or any actions contrary to the law, rules, regulations, or guidelines.

If a client is found to have engaged in any of the above actions while entering securities orders or trading, the stockbroker must immediately inform NEPSE.

In these updated regulations, the provisions for market makers and issue and sales management have been removed.

Additionally, there have been fee adjustments for stockbrokers. The recommendation fee for securities brokers is set at 15,000, the application fee at 25,000, and the membership fee at 1 lakh for limited broker service and 1 lakh 50 thousand for full broker service.

Similarly, securities traders will be subject to a recommendation fee of Rs. 25,000, an application fee of Rs. 50,000, and a membership fee of Rs. 5 lakh. Brokers and securities traders are required to pay fees to NEPSE for branch office login, with application fees set at Rs 15,000 for brokers and Rs 30,000 for securities traders.

For infrastructure development fees, brokers with limited operations must pay 25 lakhs, while those with full operations must pay 50 lakhs. Securities dealors are required to pay 75 lakhs. These fees are one-time payments upon initial subscription.

Finally, the annual renewal fee for broker companies is Rs 50,000 for limited service providers, Rs 1 lakh for full service providers, and Rs 3 lakh for traders.