Quota System Abolished in Share Broker License, Any Company Above Rs 20 Crore Paid Up Capital Can Apply For Broker License

A proposal has been put out by the Securities Exchange Board of Nepal (SEBON) to openly distribute the license for securities dealers and brokers.

Up to this point, the share broker quota was maintained and licenses were granted based on applications. The draft change to the Securities Dealers (Stock Broker, Securities Dealer and Market Maker) Regulations, 2064 (2008), has been accepted by the Board in order to overturn this system.

The regulations include a three-tier share broker system planned. There will be three different licenses offered: general securities dealer, full operating securities broker service, and limited working securities broker service.

The current brokerage company must enhance its paid-up capital from Rs 2 crore to Rs 20 crore in accordance with the new laws within two years. The stock brokers that are now providing the services fall under the limited broker category.

In order to operate as a full-fledged share broker, Rs 60 Crores in paid-up capital is now required. For this, not only new companies but also brokers operating limited services will be able to apply for promotion.

The license for the stock dealer has been proposed with a capital of Rs 1.5 Arba. Additional dealers can acquire the license only after fulfilling the requisite capital. Currently, there are 50 licensed stock brokerage companies and only Nagarik Stock Dealer holds a license of stock dealer. 

BOARDS PROPOSAL:

• The board has suggested rules for how these licenses would be given out annually. The board is certain that this will put a stop to the practice of only granting licenses to a limited number of applicants and foster competition.

• NEPSE will call for applications within 30 days of the first fiscal year. It is then proposed that the interested company or organization can apply for the stock brokerage to the SEBON for the recommendation within the first month of each financial year.

• Those who offer fully functional securities brokerage services will also have the ability to interact with depository members, including the buying and sale of securities, investment advising, investment management, and margin trading. 

• The Stock Dealer licensee will be able to buy/ sell in their own name including the buying and sale of securities. Also, work as a share underwriter and qualified institutional buyer.

• The limited broker licensee will be limited to only buy/ sell as per customers instructions. 

• The Board has also established the cost of the license for share brokers, which is broken down into three types based on level. For the broker license, the applicant must now pay a minimum fee of Rs 25 Lakhs to Rs 1 Crore. The charge for a securities dealer license will be the most expensive under the current proposal, costing Rs 1 crore, whereas for the limited broker service Rs 25 lakh and for the full operating securities broker service Rs 50 lakh. 

• A cost of Rs. 1.5 Lakh will be charged as the yearly renewal fee from the limited broker service provider, Rs 3 lakh from full operating securities broker and Rs 5 lakh from the Stock Dealer companies.