Mandatory IPO demat from next fiscal

Kathmandu, June 13

Companies preparing to issue initial public offering (IPO) should mandatorily obtain the membership of Central Depositary System and Clearing Ltd prior to allotting shares. This provision will come into effect from the upcoming fiscal year, 2016-17.

After enforcing dematerialisation (demat) in trading of stocks in the secondary market in January this year, Securities Board of Nepal (SEBON) — the regulator of securities market — has taken the initiative to implement dematerialisation in primary market as well.

Those applying for IPO need to open demat accounts at depositary participants (DPs) and mention the account number in the application form once the provision come into enforcement.

Thus, the allotted shares will be deposited in the respective accounts of individuals who are selected through the allotment process.

Moreover, only those with demat accounts would be eligible to apply for IPOs. The existing 49 DPs provide this service, where an individual can open a demat account for Rs 50. DPs charge Rs 100 annually as maintenance fee.

This provision is going to be started from Kathmandu in pilot phase and will be gradually expanded across the country, informed Rewat Bahadur Karki, chairman of SEBON.

SEBON has envisioned paperless trading in stock market, so that foreign investors can also participate in trading in the country’s sole secondary market.