Experts Argue Against the Necessity of Dual ISINs for Securities in Nepal

Experts in the financial sector have expressed strong views against the need for dual International Securities Identification Numbers (ISINs) for shares and other securities, asserting that a single ISIN is sufficient for proper identification and trading. Their reasoning stems from a variety of technical, regulatory, and operational considerations that indicate no real need for the duplication of these identification numbers.

One ISIN is Sufficient for Identification

According to financial experts, an ISIN is a unique identifier assigned to securities such as shares, debentures, and bonds, which is internationally recognized and used for trading and settlement. Experts argue that having more than one ISIN for the same security is redundant, as a single number suffices for identification. The practice of assigning dual ISINs could introduce unnecessary complications without providing any tangible benefits, they suggest.

Confusion and Technical Issues Arise from Dual ISINs

Another argument against the dual ISIN practice is the potential for confusion and technical issues. Experts warn that if two different ISINs are assigned to the same type of shares of a company, it could lead to confusion among investors, brokers, and the clearing systems. This could result in operational challenges, accounting errors, and an increased likelihood of discrepancies in the settlement process, they explain.

Regulatory and Technical Frameworks Are Built Around Single ISINs

Experts further note that the current system in Nepal, which is based on the Nepal Stock Exchange (NEPSE) and the Central Depository System (CDS), operates under a structure where each security is identified and traded using a single ISIN. The entire framework is designed around a single ISIN per security, and introducing a dual ISIN system would unnecessarily complicate the existing process, they assert. The regulatory setup, therefore, does not require dual ISINs, as a single number is both sufficient and more efficient for trading and record-keeping.

Transparency and Easier Tracking with Single ISIN

The transparency and ease of tracking securities are also cited as reasons to avoid the introduction of dual ISINs. Experts believe that managing a single ISIN per share makes it easier to track corporate actions such as ownership changes, bonus issues, rights issues, mergers, and demergers. If dual ISINs were introduced, the complexity of data management would increase, making it harder to track these activities efficiently. A single ISIN, on the other hand, provides a clear and simplified method for monitoring the securities.

International Practices Do Not Support Dual ISINs

Internationally, the practice of assigning dual ISINs to the same class of shares is uncommon. Experts point out that globally, a single ISIN is typically assigned to a security unless there are structural differences, such as in the case of ordinary and preference shares. They argue that the international financial system does not support dual ISINs for the same class of shares, further substantiating their position that this practice is unnecessary.

Increased Costs and Administrative Burden

One of the major concerns raised by experts regarding dual ISINs is the additional administrative burden and costs it would create. Managing dual ISINs would require more administrative processes, reporting, and coordination, which could increase operational costs. This, in turn, could make the securities market more expensive to operate, potentially deterring both local and international investors.

Conclusion: Single ISIN is Sufficient for Identical Shares

Based on these points, experts have concluded that if a company’s shares are of the same type, a single ISIN is both sufficient and appropriate. They suggest that unless there are structural changes to the shares—such as creating different classes of shares—there is no need for dual ISINs. The current system of assigning one ISIN per share provides a more efficient, cost-effective, and transparent approach to securities identification and trading.