The Office of the Attorney General (OAG) has flagged serious irregularities in the IPO approval process by the Securities Board of Nepal (SEBON), warning that these lapses expose small-scale investors to significant risks. The concerns come amid allegations that SEBON officials accepted bribes—reportedly up to five percent of IPO amounts—from hydropower companies in exchange for approval.
The controversy escalated after the Commission for the Investigation of Abuse of Authority (CIAA) raided SEBON’s office last week and launched a formal investigation. SEBON has since suspended the IPO approval process for 89 hydropower companies under review.
In its 62nd Annual Report, the OAG criticized SEBON for approving IPOs at premium prices for four life insurance companies—Nepal Life Insurance Company, IME Life Insurance, Sun Nepal Life Insurance Company, and Citizens Life Insurance—without conducting proper due diligence. It noted that SEBON failed to thoroughly analyze key documents such as net worth evaluations, actuarial assessments, and justifications for expense write-offs.
The OAG also highlighted weak regulatory enforcement, pointing out that some hydropower companies illegally transferred promoter shares before the mandatory three-year lock-in period expired. Several companies were also found to have received IPO approval without completing at least 50 percent of project construction, violating SEBON’s own criteria.
The report further revealed that a manufacturing company listed unpaid electricity bills as assets to inflate its financial statements and qualify for IPO approval at premium prices. Other malpractices included inflating profits by misclassifying worker liabilities as social security expenses and undervaluing depreciation.
The OAG has urged relevant authorities to launch thorough investigations and strengthen regulatory oversight to safeguard investor interests and restore credibility in Nepal’s capital markets.
