The Securities Board of Nepal (SEBON) is preparing to instruct brokerage companies to pursue mergers as most of them have not taken adequate steps to increase their capital, despite the approaching deadline to meet the required paid-up capital.
SEBON amended the Securities Businessperson (Securities Brokers and Securities Dealers) Regulations, 2064 for the fifth time on September 14, 2022. The amendment mandates brokerage companies to maintain paid-up capital ranging from Rs 200 million to Rs 1.5 billion, depending on the scope of their operations.
Newly registered brokerage companies have adhered to the updated requirements. However, older brokers were instructed to raise their paid-up capital by mid-July 2025. With most of the older brokers failing to comply, SEBON is finalizing guidelines for facilitating mergers and acquisitions in the sector.
"The board is in the final stages of preparing guidelines for broker companies to undergo the merger and acquisition process," SEBON spokesperson Niranjaya Ghimire told New Business Age.
The fifth amendment to the Securities Businessperson (Securities Brokers and Securities Dealers) Regulations, 2064 BS empowers SEBON to formulate and enforce guidelines for mergers or acquisitions of securities brokers and dealers. The upcoming guidelines aim to address non-compliance issues and provide a pathway for struggling brokers to meet capital requirements.
"The guidelines will encourage brokers who have not met the minimum paid-up capital requirement by the deadline to consider mergers and acquisitions," Ghimire added.
SEBON has already requested non-compliant companies to submit capital increase plans. Under the revised regulations, first-tier limited brokers must maintain a minimum paid-up capital of Rs 200 million; second-tier brokers, offering depository participant (DP) services, share trading, investment advisory, management, and margin trading, need Rs 600 million; and stock dealers are required to have Rs 1.5 billion in paid-up capital.
As of now, 42 new brokerage companies have been registered under the updated capital requirements. Prior to the fifth amendment, the minimum paid-up capital was Rs 20 million for limited brokers and Rs 50 million for brokers offering margin trading services.
Older brokerage companies, however, argue that while merger guidelines may help increase capital, additional time should be granted to comply without merging.
"The deadline to increase the paid-up capital to Rs 200 million for limited trading brokers and Rs 600 million for margin trading services is too short and impractical," said Dharmaraj Sapkota, former president of the Stock Broker Association of Nepal.
Sapkota suggested extending the deadline to June 2027, allowing companies to raise capital by adding new shareholders. He also highlighted the contributions of older brokers to Nepal's securities market since 1993, urging regulators to provide concessions.
Currently, Nepal has 92 brokerage companies, including two stock dealers. Nagarik Stock Dealer Company has a paid-up capital of Rs 3.73 billion, and Nabil Stock Dealer holds Rs 1.52 billion.
Among second-tier brokers, Sunny Securities, AIMB Stock Market, and Himalayan Securities Limited have met the capital requirement of Rs 600 million. Meanwhile, most companies continue operating as first-tier limited brokers.
Among the older firms, 11 have achieved the Rs 200 million minimum capital requirement. SEBON has instructed the remaining companies to meet the standards within the deadline of mid-July 2025.
