Out of the 38 brokerage firms that have yet to meet the new paid-up capital requirement, 25 have submitted their capital increase plans to the Securities Board of Nepal (SEBON). Under the Securities Businessperson (Stock Broker, Securities Dealer, and Market Maker) Regulations, 2008, which were amended in August 2022, all brokers must meet the new capital requirements by June 2025.

According to the revised regulations, a broker with limited activities must have a paid-up capital of Rs 200 million. A full-service broker, engaged in share trading, depository participant (DP) services, investment advisory and management, and margin trading, must maintain Rs 600 million. Similarly, a brokerage firm that also operates as a third-tier stock dealer must meet a Rs 1.5 billion capital requirement.

Last year, SEBON issued licenses to 42 new brokerage firms under the updated capital framework. However, older brokerage firms, which received their licenses before the rule change, are still in the process of increasing their capital. Before the new provisions were introduced, brokerage firms established in 1993 were required to maintain a minimum paid-up capital of only Rs 20 million for limited operations and Rs 50 million for those offering margin trading services.

SEBON spokesperson Niranjay Ghimire stated that of the 38 firms yet to meet the requirement, 25 have already submitted plans for raising capital, primarily through mergers, bonus shares, and right share issuance. He added that while the remaining firms have expressed their commitment to meeting the deadline, they have yet to submit a detailed plan. SEBON remains optimistic that all firms will comply with the revised capital structure within the stipulated period.

Some brokerage firms have already initiated their capital-raising strategies. Kohinoor Securities (Broker No. 35) is increasing its paid-up capital to Rs 200 million by issuing bonus shares. Managing Director Bharat Ranabhat stated that the process of capitalizing reserves is in its final stage, with approvals pending at the Office of the Company Registrar. Similarly, Primo Securities (Broker No. 16) has planned to raise Rs 200 million from its reserves. CEO Meghnath Upadhyay clarified that the company has no plans for a merger and will meet the board’s requirements using its own capital. He asserted that even if brokers propose a merger, it is unlikely to happen, as older brokers are capable of raising capital from their reserves.

ABC Securities (Broker No. 17) is adopting a mixed approach to meeting the requirement. Executive Chairman Nitesh Kumar Agrawal stated that after the distribution of bonus shares this year, the company has established a paid-up capital of Rs 160 million and plans to raise an additional Rs 40 million through right shares. He assured that the company is working to meet the capital requirements by the deadline set by SEBON.

Older brokerage firms, which initially started with Rs 20 million in capital, now need to increase it tenfold, while those that began with Rs 50 million must raise it twelve times to continue offering margin trading services. To assist firms in meeting these requirements, SEBON is preparing new guidelines for mergers and acquisitions in the brokerage sector. A high-ranking SEBON official confirmed that these guidelines are set for implementation within this month.

The fifth amendment to the Securities Businessperson Regulations, 2008, has granted SEBON the authority to formulate and implement merger and acquisition rules for brokers and stock dealers. The regulatory body is now finalizing these guidelines in line with this provision.

Nepal currently has 92 brokerage firms, including two stock dealers. Among them, Nagarik Stock Dealer Company has the highest paid-up capital of Rs 3.73 billion, followed by Nabil Stock Dealer, which has Rs 1.52 billion.