The government has proposed to slap a cash fine of up to Rs 30 million and a jail term of three years or both against the individuals if found guilty of insider trading in the secondary market.
Finance Minister Bishnu Prasad Paudel in this regard presented a bill on amendment to the Securities Act at the House of Representatives on Thursday. Through the amendment, the government has sought to take stern measures against those who are involved in manipulation of the stock exchange market.
Through the amendment, the government has planned to charge a cash penalty by multifolds to the existing amount while increasing the jail term to three times.
“Provided anyone is found guilty in insider trading with a specified amount of transaction, they will be penalized with the amount equivalent to the share prices they pursue for trading while confiscating the traded amount. If the traded amount is not revealed, the convict will be slapped with a cash fine between Rs 5 million and Rs 30 million and a jail term of three years, or both,” reads the bill tabled by Paudel at the lower house.
Currently, the offender of the case has to pay a cash fine of only the amount in question and serve a one-year jail term.
At a time when a number of big investors are suspected for being involved in malpractices like cornering and insider trading to secure undue benefits out of share trading, the government has put forth strong actions against the wrongdoers. At present, analysts have been blaming the soaring share prices of companies with dismal financial performance for such manipulation by big investors.
Just in a short span of one month, the Nepal Stock Exchange index increased by an exorbitant mark of around 1,000 points. Likewise, the daily turnover amount has also jumped to more than Rs 29 billion from around Rs 2 billion.
The proposed bill also talks about taking action against the individuals involved in fake trading, price manipulation and disseminating false information to influence the share trading. In such cases, the guilty will face a cash fine between Rs 500,000 and Rs 5 million and jail penalty for up to three years.
The bill has also envisioned barring high-ranking officials of the Securities Board of Nepal (SEBON) from working in executive positions at the organizations licensed by the regulator. The restriction will be in place for two years from the date that these officials retire from their position or leave their jobs at the SEBON.
Withdrawal of provision of appointing a private sector chartered accountant and a representative of the Federation of Nepalese Chambers of Commerce and Industry from the SEBON board is among the clauses in the proposed bill. Similarly, the experience tenure to be eligible as an expert in the SEBON board has been increased to 10 years from existing seven years. It has also envisioned regulating the margin trading and specialized investment fund through introducing proper guidelines.
