18 August 2024, Kathmandu
The Securities (First Amendment) Bill, 2081, has been introduced in Parliament, proposing several key revisions and new provisions to the existing Securities Act of 2063.
Securities First Amendment Bill 2081
The bill aims to modernize the securities market by recognizing new financial instruments and tightening regulatory measures.
One of the notable changes is the inclusion of “central depository service” as defined under a newly added clause (c 1) in Section 2 of the Act. This clause outlines the dematerialization of securities through electronic means and maintaining a central record, a provision that was absent in the previous Act.
The bill also introduces the recognition of “derivative products” within the legal framework. The lack of legal recognition has previously hindered the introduction of these products. Now, with the addition of clause (d 1) in Section 2, derivatives such as forwards, futures, options, and swaps will be formally recognized as contractual financial instruments in the securities market.
Another significant addition is the formal acknowledgment of “specialized investment funds” within the Act. The newly proposed clause (1) after Section 2 (t) will define these funds, including private equity, venture capital, and hedge funds, providing a clear legal basis for their operation.
The bill also seeks to clearly define margin trading by adding Section 63A, which will set the limits for margins provided by securities dealers and establish guidelines for interest rates, fees, and other related transactions.
Furthermore, the bill proposes the introduction of a new provision under Section 86a, granting the Securities Board the authority to request banking transaction records from Nepal Rastra Bank during investigations related to securities transactions. This provision emphasizes confidentiality and restricts the use of such records solely for investigative purposes.
Lastly, a new restriction is introduced under Section 111a, prohibiting former chairpersons and officers of the Securities Board from working in licensed organizations for two years after leaving their positions. This measure is intended to prevent conflicts of interest and ensure regulatory integrity.
The Securities (First Amendment) Bill, of 2081, represents a significant step towards strengthening the legal framework governing Nepal’s securities market, with the potential to foster greater transparency, innovation, and investor confidence.
Securities First Amendment Bill 2081
