During the eight months period, investors paid 118.2 million in fines while selling 14,767,386 units of shares in 13,344 transactions. The amount increased by 17 percent compared to the last FY. In the last FY, investors paid Rs 98.1 million through 9,996 transactions.
In recent weeks, the stock market bounced back from losing streak which led to a huge increase in closeout fines. Apparently, investors sometimes knowingly closeout when the market is booming.
In the past, the stock market saw a huge closeout problem in 2074. That year, investors paid closeout fine from Rs 185 to Rs 12.6 million on a single day. During those days, CDSC issued a strict warning against those investors who intentionally made closeout transactions and warn them to enlist in blacklist if proven guilty of such offense.
“Many times the problem of closeout occurs due to human and technical error,” said Priya Raj Regmi, Former Chairman of Nepal Stock Broker Association. The problem may occur from both investors and brokers side, he added.
“This problem arises when brokers could not find sellers’ script during excessive trade order and give sell order in different names than sellers’,” said Regmi. .
In recent times, investors ended up in closeout due to the online trading system, said Rajan Lamsal, Secretary of Investors Forum. The investors mistakenly enter different keys and sell shares which may not have arrived in their demat account, thereby, ended up in closeout, he added.
In some cases, investors ended up in closeout when they delay handing over of sell order slip to depository member. Investors require to pay fine up to 20 percent of their sell amount in closeout. Such fine is receivable by a buyer after paying immediate capital gain tax of 25 percent.
In order to solve the problem, investors have urged regulatory bodies to set up a mechanism that will minimize losses.
As per Regmi, if such a problem arises due to human error having no ill intention, then such investors should be given a chance to make up the mistake. They should be allowed to buy through the auction market and handover them to the buyer. However,an ill intention holder should be punished under the law, he added.
Similarly, Lamsal also shared the view that in order to address the problem, the auction market should be started as soon as possible.
