Kathmandu, November 19:

Despite a huge investment in the stock market, return has not been so lucrative. Small investors have, time and again, lost their hard-earned money due to weak corporate governance, mismanagement, inadequate legal provisions and weak regulations from the concerned institutions.

Radesh Pant, president of Nepal Bankers’ Association (NBA) opined that mismanagement leads to the failure of any company. “This needs to be improved,” he said. “Even our existing capital is not vibrant as there is a lack of diversification of companies listed at the Nepal Stock Exchange Ltd,” he said adding that banks and finance companies have dominated the stock market. Pant was speaking at a programme ‘Corporate failure and investors’ protection’, organised by Investors Club of Nepal (ICON) in the capital today.

He strongly stressed on making legal framework more investor-friendly. “What is crucial is that Nepal Rastra Bank (NRB), the central bank of the country, should strengthen its monitoring and regulatory mechanisms,” Pant said.

“As Investors face a risk while investing in any company, they must get enough information about the company’s status and future plans to safeguard investment,” he said stressing on the need for investors’ education to protect them.

Bharat Raj Uprety, senior corporate lawyer, speaking on the occasion, advised three ways — according to which investors could be protected — legal provision, strong regulatory mechanisms and court system. “To protect investors’ money, there has to be strong legal provisions and they should be implemented effectively,” he said.

“The functioning of NRB’s employees, implementing agencies and court’s judges should be effective, if we want to protect investors from being cheated,” Uprety suggested.

Mahaprasad Adhikari, coordinator of Nepal Bangladesh Bank Reform team recently assigned by the NRB, said that companies’ prospectus needs to be studied before investing in any company, if we want our hard-earned money to be protected. He suggested the investors to study the companies’ progress, management system and governance before investing.

Jeewan Basnet, president of ICON suggested investors to do ‘real’ homework before investing in any company listed in the stock market. He said that they need to look at the progress report, growth rate, service quality, transparency, and profit and loss accounts seriously before putting in their hard-earned money.

“Global practice is that companies that are interested to go public, should produce certificate of General Accounting Acceptance Procedures (GAAP), but in Nepal nothing as such has been developed yet,” Basnet said.