Stakeholders call for stop to insider trading of stocks

Kathmandu, June 18

Stakeholders of the stock market on Tuesday strongly urged the Securities Board of Nepal (SEBON) to check the insider trading in the companies listed in the share market.

Stating that the insider trading was rampant in banking and financial institutions (BFIs) and a handful of investors who have access to that information were benefitting from the stock market while majority of investors were cheated, they asked the SEBON to prepare a database of the individuals concerned with the vital financial information of the respective company.

They made the comments at an interaction programme organised by the SEBON to collect recommendations for the security-sector policies for the next fiscal year 2019/20.

“In order to make the stock market vibrant, insider trading must be stopped. The SEBON should create a database of the people concerned with the information, including their relatives,” said Amrit Khanal, a lawyer.

He said that the media was used as a tool in the misuse of information so it should be controlled by including some additional provisions in the SEBON rules.

He also blamed the SEBON staff for their involvement in the insider trading.

Other experts also suggested effective coordination between the SEBON and Press Council for the effective implementation of the Journalistic Code of Ethics to check the unwanted activities of journalists and the media in the share market.

Vice-President of Nepal Investors’ Forum Tulsi Ram Dhakal also pointed towards the need for having stronger provisions to stop insider trading of information.

“Another matter of concern is the promoter shares in real sector companies. There is a growing trend in the promoters to sell their part of shares immediately after three years and ousting themselves from the company,” he said.

According to him, this trend has increased the fear of insecurity among the investors of the real sector companies. As per the rule, promoters can sell their shares only three years after they were listed in the Nepal Stock Exchange (NEPSE).

Experts suggested that the promoters should not be allowed to sell all the shares at once; instead there should be a rule to allow the sale of only a small part of their shares in a year.

Radha Pokharel, a share investor, recommended policy ease to open the share market for the Non-Resident Nepali investors.

However, Chief Executive Officer of the Reliance Life Insurance Company Pravin Raman Parajuli suggested creating repatriation mechanism for the NRN investors. “It is not difficult to attract NRN investors in the share market, but we don’t have the repatriation system,” he said.

He also urged the capital market regulator to create a policy to allow the insurance companies to invest the fund in the productive sector.

KP Pandey of Saraswati Campus suggested the SEBON to make provision that the public director of a company should have certain level of education or training.

Experts also demanded the symmetry in the financial reports the listed companies published every quarter.

Chairman of the SEBON Dr. Rewat Bahadur Karki said that the recommendations of the experts would be taken seriously and the board would try to accommodate them as far as possible. 

Published in The Rising Nepal daily on 19 June 2019.