Net Worth Requirement for DP Being Revised

Securities Board of Nepal (SEBON) is setting afoot plans to amend the mandatory net worth requirement for acquiring Depository Participants (DP) license under the Central Depository System (CDS).

 

SEBON Chairman Baburam Shrestha said that preparation to review existing minimum net worth requirement for essential infrastructures is underway. Once new net worth requirement is decided, necessary amendments to existing regulations will be made and DP membership will be provided, he added.

 

Currently companies must have a net worth of Rs 10 million for acquiring a DP membership. Sources have claimed that SEBON is preparing to cut down the current net worth requirement after broker companies expressed reluctance to acquire DP membership citing infeasible net worth requirement.

 

“SEBON is eager to provide DP membership at the earliest by reviewing the net worth requirement,” Shrestha said. “To secure the interest of the investors and to ease off the process for entrepreneurs, we are making preparations to amend existing bylaws,” he said.

 

It is mandatory for any company to have separate infrastructure for providing DP services. Therefore SEBON is planning to provide DP membership by deciding the minimum net worth requirement necessary for infrastructure development and business operation.

 

The report has recommended providing DP membership to any firm having a minimum net worth  of Rs 2 million and has added that such firms must be adding Rs 2 million net worth every year, until it reaches Rs 1 billion, source claimed.

 

However, this recommendation does not seem to satisfy SEBON. “The feasible study focuses on mandatory net worth requirement rather than on meeting the requirement within certain period,” Shretha said. SEBON is preparing to make such amendments to ensure the participation of the entire securities broker companies that will activate the CDS in an effective way.

 

The report will acquire legal status after being approved by SEBON and the Finance Ministry. The process is assumed to take some time for being actualized. Experts opine that the procedure for amending the provision will take longer time and pointed that broker companies who have not acquired DP membership, citing higher net worth requirement, will have to wait a while to acquire it.

 

Share brokers have requested SEBON to amend the existing regulations to pave way for companies to meet the net worth requirement within a certain time frame. Following indications of approval from the concerned authorities, brokers had conceded to acquire Clearing Membership (CM). Accordingly, 49 share broker companies applied for the membership. Out of them, 22 have acquired it.