MP Lima Adhikari Questions Securities Board of Nepal's Regulatory Role

Kathmandu. Rastriya Swatantra Party (RSP) MP Lima Adhikari has raised serious questions about the regulatory role of the Securities Board of Nepal (SEBON).

Speaking at a meeting of the Finance Committee on Wednesday, MP Adhikari questioned the alleged margin share trading, artificial price hikes, premium determination in pre-IPO, and the flipping tendency of fund managers that have been happening for years.

She stated that the 'flipping' tendency, where fund managers sell shares obtained through quotas within a short period to make profits, has increased. She asked if SEBON has implemented a lock-in or any other effective mechanism to prevent this and sought the board's response on removing or restructuring the fund manager quota.

She accused SEBON of acting only 're-actively' instead of being a 'pro-active' regulator. She mentioned allegations that a limited number of individuals have bought and sold shares worth billions of rupees on margin without making payments, leading to artificial price increases, with the involvement of high-ranking officials. She questioned why SEBON was unaware of margin trading that has been occurring for years in violation of the Securities Act, 2063.

She stated that the investigation only starting after the Asset Laundering Investigation Department corresponded highlights the regulatory body's weakness. She also accused SEBON of failing to regularly monitor broker companies.

Addressing the tendency of fund managers in the meeting, MP Adhikari said, 'There is a tendency for fund managers to sell the shares they receive through quotas quickly and make profits in a short period.' Asking if there is a lock-in or other arrangements to prevent this flipping tendency, she added, 'What is SEBON's stance on removing or restructuring this quota?'

Expressing dissatisfaction with the Securities Board's working style, she said, 'SEBON should be proactive, but it has become very reactive.' Speaking about the issue of limited individuals buying and selling shares worth billions without payment, causing artificial price increases, she added, 'This matter is the biggest financial crime in Nepal's financial sector to date, and it also involves money laundering issues.'

MP Adhikari stated that it is unfortunate that the regulator could not detect such activities happening for years in violation of the Securities Act. She said, 'Why were margin trades and purchases and sales happening for years in violation of the Securities Act not detected for such a long time? Was there a weakness in SEBON's real-time market monitoring?'

Questioning how this was possible for so many years, she raised questions about the regular monitoring and audit process of broker companies. She asked, 'Was there a flaw in the process? What steps is SEBON taking to structurally improve the daily transaction monitoring system for brokers?' She also inquired about the steps taken to investigate transactions without payment.

Similarly, MP Adhikari also showed interest in the issue of IPO and pre-IPO. Mentioning that many companies are increasingly collecting funds with premiums from general investors in the name of pre-IPO, she sought SEBON's stance on this. She said, 'How is the premium determined in pre-IPO? Where is this large amount of money collected deposited, in which fund, and how is it kept secure?'

She pointed out that the trend of companies projecting high profits before issuing IPOs but going into loss within a few months of IPO issuance is repeating. She said, 'Promoters easily sell their shares and exit as soon as the lock-in period expires. Is SEBON's current lock-in management sufficient to prevent this?'