Kathmandu. KATHMANDU: Former president of Nepal Investors’ Forum and Chhote Lal Rauniyar has presented a 15-point suggestion to the Securities Board of Nepal (SEBON) for the further strengthening of capital market.

Chairman of the Securities Board of Nepal (SEBON) Dr. He met with Gopal Prasad Bhatta and submitted suggestions for the long-term improvement of Nepal’s capital market and for the welfare of investors.

Rauniyar has demanded that the capital gains tax should be reduced, especially for share trading. He also suggested reducing the dividend tax rate from the current 5 per cent to 4 per cent for long-term investors holding shares for more than a year and from 7.5 per cent to 6.5 per cent for short-term investors.

Rauniyar claimed that reducing the profit tax will increase the volume of transactions in the market and thereby increase the government’s revenue. According to him, if such an arrangement is made, an environment can be created for daily transactions of Rs 15 to 20 billion.

The 15-point suggestions presented by Rauniyar to the President of Sebon are as follows:

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1. Banks and financial institutions should be allowed to do business in the secondary market

Arrangements should be made for banks and financial institutions to buy and sell shares in the secondary market without any hindrance, and the existing 6-month restriction should be removed.

2. Capital gains tax should be reduced

The capital gains tax is 4 percent for long-term investors who hold shares for more than a year and 6 percent for short-term investors.TAG_OPEN_em_97 It should be 5 percent.

3. All fees in the stock market should be modified

Various fees to be paid to SEBON, NEPSE, CDSC and brokers should be reviewed and the dual commission system should be removed and one-way commission should be arranged.

4. Removal of additional commission from order fragmentation

The problem of the highest commission should be solved when order fragmentation occurs in the transaction system. Provision should be made to pay a lump sum commission on the basis of the total transactions made throughout the day.

5. Small investors should be protected when introducing new financial instruments

} When introducing new financial instruments such as futures and options, intra-day, short selling and exchange-traded funds (ETFs), the necessary infrastructure should be created to protect small and domestic investors.

6. Double tax on dividends to be removed

The additional 5 percent double tax on bonus and cash dividend to be distributed after the company has paid tax should be abolished.

7. Timely General Meeting and Dividend Distribution

The AGM shall be held within a maximum of two months of the expiry of the fiscal year and the dividend shall be transferred to the investors’ account within one month of the conclusion of the AGM.TAG_OPEN_em_87

8. Demat account renewal needs to be eliminated

The hassle of renewing the demat account every year should be removed and the investors should be made easier.

9. Removal of dividend ‘freeze’ on margin transactions

Unnecessary process of re-freezing bonus shares and cash dividends should be removed in case the shares have already been pledged at 70% margin lending.

10.TMS should be improved to international standard

} The existing TMS system should be vastly improved and based on international standard technology. In addition, an easy payment gateway should be made for Non-Resident Nepalese (NRN) and Foreign Direct Investment (FDI).

11. NEPSE should be modernized and converted into a public company

Nepal Stock Exchange (NEPSE) should be modernized and converted into a public company at the earliest.

12. 10 policies to be continued in the IPO

The 10-unit policy applicable to the initial share issue (IPO) should be continued.

13. Investment of Non-Resident Nepalese should be made easy

Arrangements should be made to allow Non-Resident Nepalese (NRNs) to invest in Nepal and to easily take the profit from their investment. For this, transparent and easy arrangements should be made by removing the existing legal hurdles.

14. The Securities Board should be given full autonomy

The Securities Board of Nepal should be developed as a modern and effective regulatory institution with complete autonomy and necessary powers.TAG_OPEN_em_73

15. Market noise and cybercrime should be controlled

SEBON and NEPSE should establish a separate cell to monitor the activities that spread unnecessary rumors and influence the stock market. Also, strict legal provisions should be made to control cybercrime related to the market.

Rauniyar expressed the belief that the implementation of these suggestions would help Nepal’s stock market achieve a new height and further strengthen investors’ confidence.

According to him, policy-level reform is inevitable for the effective and correct mobilization of capital available in the market in the present difficult situation. He stressed the need for coordination among regulatory bodies, government and other stakeholders to make capital market sustainable, transparent and investment-friendly.