The Securities Board of Nepal (SEBON) is planning to introduce a mandatory licensing system for stock market analysts. This comes in response to a growing number of self-proclaimed 'market analysts' who encourage investments in specific companies, raising concerns about their impact on investor losses.
A senior official from SEBON stated that the board opted for such a move due to increasing complaints from investors who suffered losses after following unlicensed analysts. Dr. Navaraj Adhikari, executive director and administrative head of SEBON, confirmed that the board is working on necessary regulations to license market analysts and investment advisors as part of the Financial Sector Development Strategy.
"In the near future, only licensed individuals will be allowed to comment on the securities market," he shared.
In India, the Securities and Exchange Board of India (SEBI) has required a license for research analysts under its Research Analyst Regulation since 2014. The purpose of this rule is to safeguard investors’ interests. However, investment advisors, credit rating agencies, and asset management companies are not required to obtain separate licenses under SEBI regulations.
In Nepal, there are no such restrictions yet, and anyone can act as a stock analyst. Following recent market fluctuations, some investors faced significant losses, sparking concerns about unregulated advice. Complaints arose when companies with poor financial records saw sharp rise in stock prices, which many attributed to the influence of these analysts.
In response, Nepal Stock Exchange (NEPSE) issued a clarification stating that no one is officially licensed as a stock analyst. SEBON is now drafting a legal framework to address this issue. Murahari Parajuli, information officer at NEPSE, emphasized the need for legal measures to curb market manipulation by unauthorized analysts.
Some investors, like Laxman Ghimire from Sindhuli, have reported losses after following advice from analysts on platforms like Clubhouse and YouTube. Despite these experiences, Ghimire continues to seek analysis from these platforms, highlighting the trust that self-proclaimed analysts still hold.
Nayan Bastola, a long-time participant in Nepal's securities market, has called for the regulatory body to officially identify market analysts and issue licenses. He pointed out that the practice of using social media platforms such as Clubhouse and Facebook Live during trading hours has become increasingly problematic.
Investor Dipendra Agarwal, a frequent participant in Clubhouse discussions, defended his actions, stating that he shares his 30 years of experience and is willing to obtain a license if required.
The use of technical and fundamental analysis in market forecasting is growing in Nepal. Experts note that social media has become a primary source of information for many investors, underscoring the need for enhanced financial literacy programs.
As of now, more than 6.4 million investors hold demat (beneficiary) accounts in Nepal, which are required for securities transactions. However, only 2.3 million are actively involved in secondary market trading, according to NEPSE.