The Ministry of Finance has approved a nine-month extension for securities brokerage firms to meet the minimum paid-up capital requirement of Rs 200 million, offering regulatory relief to firms at risk of non-compliance by the end of the current fiscal year.
The extension follows a proposal from the Securities Board of Nepal (SEBON), which sought to amend existing regulations to allow more time for broker companies to meet revised capital thresholds. SEBON spokesperson Niranjaya Ghimire confirmed that the ministry has endorsed the amendment, which also enables qualified brokers to participate in margin trading and allows stock dealer firms to raise capital through IPOs.
The regulatory amendment is expected to benefit nearly two dozen brokers who were unlikely to meet the capital levels within the mid-July deadline. The SEBON board of directors is scheduled to meet on Wednesday to finalize the effective date for implementing the revised rules.
Nitesh Kumar Agrawal, Vice President of the Stock Brokers Association of Nepal (SBAN) and Managing Director of Broker No 17, ABC Securities, welcomed the decision. He said the additional time will ease pressure on older brokerage firms that were facing significant capital expansion requirements, up to tenfold increase in some cases. According to Agrawal, most firms plan to capitalize retained earnings from this fiscal year to meet the new capital benchmarks.
Read: SEBON Proposes Nine-Month Extension for Brokers to Meet Paid-Up Capital Requirement
SEBON had revised the Securities Dealers Regulations in September 14, 2022, to introduce a three-tier capital framework for broker licensing.
Under the revised structure, brokers operating with limited services are required to maintain a minimum paid-up capital of Rs 200 million. Those offering services including share trading, depository participant (DP) functions, investment advisory, investment management, and margin trading must maintain a minimum capital of Rs 600 million. For firms operating as full-fledged stock dealers, the requirement is set at Rs 1.5 billion.
These rules were initially applied to 42 new brokerage applicants, and existing brokers, many of whom have been in operation since the early 1990s, were given until mid-July to comply with the tiered capital structure.
Previously, legacy brokers were required to maintain a minimum paid-up capital of Rs 20 million for basic services and Rs 50 million for those engaged in margin lending. The newly approved extension provides a critical window for these firms to align with modernized capital standards and preserve their operational licenses.
Read: SEBON Approves Directive for Broker Mergers and Acquisitions to Meet Capital Requirements
