The Securities Board of Nepal (SEBON) has proposed a new investor classification framework based on factors such as financial capacity, risk-bearing ability, investment experience and investment objectives. The regulator says differentiated rules are necessary because applying a single regulatory regime to all investors may not be appropriate for a modern capital market.
Under the proposed framework, investors would be divided into seven categories: Retail Investors, High Net-worth Investors (HNI), Qualified Institutional Buyers (QIB), Anchor Investors, Strategic Investors, Employee Category and Promoter Category.
Retail investors would comprise ordinary individual investors and receive simplified procedures, greater information access and stronger regulatory protection. HNIs would include financially capable individuals able to make larger investments and assume higher risks.
QIBs would consist of professionally regulated institutions such as mutual funds, insurance companies, pension funds, banks and licensed investment firms. Anchor investors would be qualified institutional investors committing funds during the initial stage of book-built public offerings.
Strategic investors would invest for long-term objectives and contribute to company development, while separate arrangements would apply to employees and promoters regarding share reservations, ownership, lock-in periods and information disclosure.
SEBON says investor classification could influence IPO allocation, public offerings, book building, derivative transactions, access to high-risk instruments, investor protection and information disclosure. The regulator plans to establish clear legal qualifications for each category and periodically review the framework as Nepal’s capital market develops.
