Key Decisions Expected on Margin Trading, New Benchmark Index, and Tax Reforms

The Securities Board of Nepal (SEBON) is preparing for an important board meeting that could shape the next phase of capital market reforms. The meeting will include the participation of the newly appointed board member, Senior Joint Secretary Uttar Khatri, and will table the task force’s preliminary reform recommendations for approval.

According to SEBON sources, the upcoming meeting is expected to discuss and possibly decide on several key policy issues directly affecting Nepal’s stock market.

Major Expected Decisions

1. Official Implementation of Margin Trading System
SEBON is likely to officially implement the Margin Trading System, enabling investors to access margin facilities through licensed stockbrokers. This will help increase liquidity in the secondary market and allow investors to expand their portfolios more efficiently.

2. Tax Policy Clarity and Simplification
The board will discuss the task force’s recommendations to define capital gains tax as a final tax and to pressure the Ministry of Finance to simplify the process of obtaining tax clearance certificates based on transaction tax records. These measures aim to make tax procedures more transparent and investor-friendly.

3. Dividend Tax on Bonus Shares to Be Paid by Companies
The meeting will also deliberate on the recommendation that companies themselves should bear the dividend tax on bonus shares, reducing administrative burdens for individual investors.

4. New Benchmark Index and Circuit Breaker Review
SEBON plans to officially adopt the All Equity Index and develop a new Free Float-based benchmark index to better reflect market dynamics. Additionally, the board will review the circuit breaker rules to enhance market stability and transparency.

5. Establishment of Investor Grievance Redressal Mechanism
The meeting will discuss setting up a dedicated Investor Grievance Redressal Mechanism to ensure timely resolution of complaints and promote investor confidence.

6. Beneficiary Accounts and “Z Group” Classification
SEBON may also allow investors to open multiple beneficiary (demat) accounts and classify underperforming listed companies into a “Z Group”, signaling higher risk and compliance issues.