The Securities Board of Nepal (SEBON) has approved a new directive to help broker companies meet capital requirements through mergers and acquisitions, easing pressure on firms facing mandatory capital increases starting the upcoming fiscal year, 2025/26.
The directive, formulated under SEBON’s regulatory authority, is set to be implemented soon.
Currently, 38 brokerage firms have yet to meet the required capital thresholds. Of these, 25 companies have submitted capital-raising plans, primarily through mergers, as well as issuing bonus and rights shares. However, some firms that initially intended to merge have withdrawn their plans and are now opting to fulfill the capital requirement using reserve funds to issue bonus shares.
A senior SEBON official, speaking on condition of anonymity, confirmed to Aarthik Abhiyan, a sister publication of New Business Age, that SEBON’s board approved the merger and acquisition directive during a meeting on Wednesday, March 26.
Read: 38 Brokerage Firms Strive to Meet Capital Requirements
“This directive has been developed in accordance with existing regulations, and once implemented, they will simplify the process for brokers struggling to meet the capital requirements,” the official said.
The fifth amendment to the Securities Businesspersons (Stock Brokers and Securities Dealers) Regulations, 2064 grants SEBON the authority to establish and enforce necessary directives for mergers and acquisitions in the brokerage sector.
Under the new provisions, a securities broker or trader can merge with or acquire another broker or trader with SEBON’s approval, with all assets and liabilities automatically transferring to the newly formed entity.
On September 14, 2022, SEBON amended the Securities Business (Stockbroker and Securities Dealer) Regulations, 2064, introducing three categories of brokers based on capital requirements: First-tier brokers (limited functions) – Rs 200 million in paid-up capital; second-tier brokers (share trading, depository participation, investment advisory, investment management, and margin trading) – Rs 600 million in paid-up capital; and the third-tier stock dealers (full-fledged stock dealers) – Rs 1.5 billion in paid-up capital.
The board has already issued 42 new brokerage licenses under these revised provisions, making it mandatory for all existing brokerage firms to maintain a minimum paid-up capital of Rs 200 million if they wish to continue offering brokerage services.
Before the new licensing regime, brokers operating since 2050 BS were required to maintain a minimum paid-up capital of just Rs 20 million for limited functions and Rs 50 million for margin trading services.
At present, 92 brokerage firms, including two stock dealers, serve as intermediaries in Nepal’s securities market.
