Role of Securities Board - Prajwal Bhattarai Securities Board of Nepal (SEBON) was established by the Government of Nepal on June 7, 1993 as an apex regulator of Securities Markets. It has been regulating the market under the Securities Act, 2007.

1. Role of Securities Board
of Nepal in Public Offering
Prajwal Bhattarai
Email: prajwal7bhattarai@gmail.com

2. Introduction
Securities Board of Nepal (SEBON) was established by the Government of Nepal on
June 7, 1993 as an apex regulator of Securities Markets.
It has been regulating the market under the Securities Act, 2007.

3. The Governing Board of SEBON
The board is composed of seven members. including
1. One full time chairman appointed by the Government of Nepal
2. Joint secretary of Ministry of Finance
3. Joint secretary of Ministry of Law, Justice and Parliamentary Affairs
4. Representative from Nepal Rastra Bank,
5. Representative from Institute of Chartered Accountants of Nepal
6. Representative from Federation of Nepalese Chambers of Commerce and Industries, and
7. One member appointed by the Government from amongst the experts pertaining to management of
securities market, development of capital market, financial or economic sector.

4. The major functions, duties and power of
SEBON as per Securities Act, 2006
• Approve the bye-laws of stock exchange and depository company.
• Take necessary actions to prevent insider trading or any other offenses
relating to transactions in securities in order to protect the interest of
investors in securities
• Discharge or make arrangements for discharging such other functions as
are necessary for the development of the capital market.

5. • Provide advice to Government on matters related with the development of
capital market.
• Issue necessary securities regulations and directives.
• Register the securities of public companies.
• Regulate and systematize the issue, transfer, sale and exchange of
registered securities.
• Issue license to operate stock exchange to stock broker, dealer, merchant
banker and fund manager.

6. Where a corporate Body is to sell and distribute securities to more than fifty
persons at a time, it shall make public issue for the sale and distribution of such
securities. In doing so, the role of SEBON comes into the play for following
general reasons
• Registration of Securities and approval for public offering
• Approval of the prospectus for making public issue of securities
• Approval for Re-issue of securities
• Evaluation of the corporation issuing the security

7. Registration and Issuance of Securities
• A body corporate shall have to register securities to be issued by it with
the Board prior to their issuance.
• Where a body corporate allots or sells securities after registering such
securities, the body corporate shall have to give a notice along with the
details of securities so allotted or sold to the Board within seven days.
• Where a body corporate is to sell and distribute securities to more than
fifty persons at a time, it shall make public issue for the sale and
distribution of such securities.

8. Continued…
• Where securities for which public issue has been made once could not be sold
and have to be re-issued again within one year, the body corporate which so
issues the securities may, with the approval of the Board, issue such securities by
mentioning the matters which are different than the matters set forth in the
previously published prospectus and the prospectus previously published.
• A body corporate shall have to get a prospectus approved by the Board for
making public issue of securities.
• The Board shall approve only a prospectus which contains such information as
may be adequate for investors to make evaluation as to the assets and liabilities,
financial status, profit and loss of the issuer and matters expected in the future.

9. Continued…
• Every body corporate issuing securities shall provide information on the
following matters to the Board and its shareholders as soon as possible:
(a) Such matters as may be necessary and supportive to evaluate its financial
condition,
(b) Such information as may be capable of affecting the transaction of stock
exchanges or the value of securities.

10. Regulation, Monitoring, Inspection and Inquiry
• The Board shall have full powers to regulate and monitor all activities relating to securities
for the development of capital market and interests of investors.
• The board may inspection or inquiry in relation to whether or not the stock exchanges,
securities business persons, agents and bodies corporate which have listed their securities
have complied to this Act, in the course of carrying out activities relating to securities.
• In making investigation, may demand the production of any such information, data and
statements in the course of inspection and inquired by the concerned.
• If any stock exchange or securities business person does any act in contravention of this
Act, license may be suspended.

11. Cont..
• However, the license can be revoked if;
 If one stops operating,
 If contrary to the interest of investors,
 If one violates the terms set forth in the license, Acts. Rules or By-laws,
 If one becomes insolvent being unable to repay credit to creditors,
 If makes an application for the revocation of a license,
 If one fails to submit such financial and transaction related statements as required to be submitted
to he Board,
 If one fails to pay such fees as required

12. Special powers of Boards
• In the event of the failure of any body corporate having made public issue of securities to call its
general meeting, within the specified time, to order such a body corporate to call the general
meeting.
• In the event of the failure having made public issue of securities to allot its securities within the
specified time, to order such a body corporate to refund the money paid for such securities,
• To direct the concerned to enlist any securities or to stop transactions of any securities,
• To issue a direction, also indicating the contents to be amended in the Bye-laws of the stock
exchange,
• To get the financial statements and financial reports submitted to be reviewed or examined by
accounts experts, as required,
• To direct the concerned stock exchange to restructure its board of directors,

13. Cont..
• To take appropriate action against such a member or revoke the license of such member,
• To order the concerned which has listed its securities to institute necessary action against
such a director or an employee, who has violated this Act or By-laws related to the Act,
• It shall be the duty of all the concerned to comply with any order or directions issued by the
Board in exercise of the special powers,
• The Board shall make public, as prescribed, the details of activities which it has carried out
in relation to the regulation, monitoring, inspection and inquiry of the concerned whether
they have complied with the orders or directions issued by the Board under this Act or not.

14. Security fraud and mismanagement
• Regulating bodies violate basic principles and policies
• When capital market regulator is not exercising its authority provided by law
• Companies mislead the public about the true health of the business and
regulators fail to detect it
Chilime Hydropower Company Ltd (CHCL) case
• SEBON allowed CHCL to allot shares to employees and directors of NEA
• Allotment of shares was against the norms of IPO
• No lock up agreement

15. THANK YOU !
EMAIL : prajwal7bhattarai@gmail.com
WEBSITE : www.prajwalbhattarai.com