Speaking at a Finance Committee meeting on Wednesday, SEBON Chairman Dr. Gopal Prasad Bhatta stated that the regulator will take immediate action against companies and individuals engaged in illegal "pre-IPO" business.
"Pre-IPO trading is illegal under our current legal system," Chairman Bhatta said, addressing queries from lawmakers. "The state cannot legalize unauthorized businesses just because some groups have manipulated the system. If we find these activities occurring anywhere, strict action will be taken."
To ensure retail investors are protected, Dr. Bhatta emphasized that companies seeking an Initial Public Offering (IPO) will now face stringent standards regarding transparency and corporate governance, alignment with international practices. SEBON is also refining its price determination process by increasing the participation of institutional investors, such as the Citizen Investment Trust and the Employees Provident Fund, to ensure competitive and transparent market entry.
Moreover, in a significant regulatory shift, SEBON announced the imminent rollout of a "short selling" mechanism, allowing investors to trade and generate returns during market downturns.
Addressing recent investor protests following market corrections, Chairman Bhatta noted that the absolute expectation for the stock market to rise continuously is unrealistic.
"The belief in Nepal is that the market must always grow. But no index in the world goes up indefinitely," Bhatta remarked, noting that he recently faced protests when the market dropped. "We are introducing short selling so investors can make returns whether the market goes up or down. Investors expecting a drop will be able to borrow shares, sell them, and buy them back at a lower price to secure a profit."
The regulator believes this tool will transform the one-sided psychology of local investors and encourage decisions driven by independent study and market analysis rather than panic.
Beyond equities, SEBON is actively working to transition Nepal's capital market into a broader ecosystem that includes bonds, derivatives, and commodity futures. Dr. Bhatta also revealed that the board is introducing policy provisions to curb market rumors and will coordinate closely with state agencies on property investigations and financial crime control.
The structural reforms follow the recent release of 'Nepal's Capital Market Development Guide-2083' alongside the Capital Market Policy for the fiscal year 2083/084, which outlines the board's upcoming regulatory framework.
