Under the newly proposed framework, fundamental shareholders will face a structured, four-tier disclosure process before and after executing large-scale transactions. This initiative aims to curb sudden selling pressures, mitigate insider trading risks, and protect the interests of retail investors.
Key Highlights of the Proposed Framework
-
Four-Tier Disclosure Process:
-
Phase 1: Shareholders selling above the prescribed threshold must register advance notice electronically with both NEPSE and SEBON.
-
Phase 2: The Nepal Stock Exchange (NEPSE) will publicly disclose the potential sale to inform the market.
-
Phase 3: The sales order will automatically match with actual order and transaction data.
-
Phase 4: Post-transaction details—including the exact number of shares sold, transaction date, sale price, and remaining holdings—must be made public.
-
Mandatory Declarations: Sellers must disclose their name, share class, company name, total holdings, proposed sale volume, purpose of the sale, lock-in period status, and confirmation of no unpublished price-sensitive information. To safeguard market strategies, actual selling prices and broker order strategies are exempt from advance disclosure.
-
Validity Period: The pre-sale notice will remain active for three months, after which it will automatically expire if no transaction takes place.
-
Threshold Criteria: Per the Companies Act, shareholders holding 1% or more in companies with a paid-up capital exceeding Rs 250 million, or 5% or more in other firms, are categorized as fundamental shareholders.
Addressing Market Risks and International Standards
SEBON Spokesperson Niranjay Ghimire stated that the regulations were formulated to counter the risks of sudden market sell-offs and the confusion experienced by small investors when major stakeholders offload substantial stakes simultaneously.
While Nepal currently mandates a 15-day advance notice period—notably longer than international practices like India's one-day notice or expedited post-transaction disclosures in the US, UK, Singapore, and Malaysia—SEBON noted that this duration accounts for Nepal's unique market dynamics. However, the board indicated that this timeline remains open to future review as the capital market matures and institutionalizes.
