Exercising powers under Sub-section (1) of Section 84 of the Securities Act, 2063, the regulatory body has mandated immediate systemic and operational changes across the Nepal Stock Exchange (NEPSE), CDS and Clearing Limited (CDSC), brokerage firms, merchant bankers, and listed companies.
Tech Upgrades and AI Restrictions for NEPSE
Under the new guidelines, NEPSE must submit an IT audit and Vulnerability Assessment and Penetration Testing (VAPT) report for its Transaction Management System (TMS), while addressing operational issues within the NEPSE Online Trading System (NOTS). SEBON has ordered a temporary halt on AI-based order entries pending a study on international practices and domestic requirements.
Additional directives instruct NEPSE to enable secondary market trading via a dedicated mobile app, enhance 'After Market Orders' (AMO), link Centralized Know Your Customer (C-KYC) with the TMS, and introduce new indices, including NEPSE 30 and NEPSE High Cap, utilizing a free-float market capitalization methodology.
CDSC to Implement Auto EDIS and Real-Time Alerts
To streamline settlement processes, SEBON has mandated the implementation of an 'Auto EDIS' system through API integration between CDSC and TMS, removing the need for investors to execute manual electronic instruction slips after selling shares.
CDSC is also required to issue immediate mobile push notifications regarding IPO offerings, corporate actions, settlement updates, and demat debits. Furthermore, the clearing body must establish real-time reconciliation to eliminate discrepancies between TMS holding data and actual CDSC demat records, as well as submit a strategy to resolve fractional share trading issues.
Tighter Rules for Brokers, Merchant Bankers, Listed Companies and Mutual Fund
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Securities Brokers: Must strictly segregate client funds from proprietary company accounts and enforce the T+2 settlement timeline for payout to investors. Brokerages must also establish a dedicated 'Grievance Redressal Unit' and submit monthly complaint management reports to SEBON within three working days of month-end.
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Merchant Bankers: Directed to prevent conflicts of interest during securities issuances and mandatorily attach audited financial reports when submitting applications for new Initial Public Offerings (IPOs).
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Listed Companies: Promoters and primary shareholders holding 5 percent or more of a listed company's total equity must now notify the company 15 days prior to selling their shares. The target company must immediately disclose this information to the public via NEPSE.
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Mutual Funds: Scheme managers must publish their approved prospectuses, daily unit buy/sell transactions, Net Asset Value (NAV), and total unit holder counts directly on their official websites.
As part of the broader reform package, SEBON has instructed NEPSE, CDSC, brokers, and clearing banks to launch a month-long nationwide campaign to boost financial literacy among retail investors.
