Securities Board drafts policy to bring institutional investors into share market

The Securities Board of Nepal publicized a draft Institutional Investor Policy, 2083 on Thursday and sought suggestions from stakeholders.

In a share market dominated by individual investors, the Board aims to systematically bring in institutions holding large, long-term capital.

The policy is being introduced under the Capital Market Strengthening and Revival Action Plan that Finance Minister Dr Swarnim Wagle issued on Bhadra 29.

The draft proposes dividing institutional investors into five categories: the Employees Provident Fund, Citizen Investment Trust, Social Security Fund, insurance companies, banks and financial institutions, and collective investment schemes. It proposes bringing them into the capital market in an organized manner.

Under the initial proposal, an institutional investor would not be allowed to put more than about 3 to 5 percent of its total investment assets into any single listed company. A limit is also proposed capping investment in any one sector at about 20 to 25 percent of total equity investment, to prevent share holdings from concentrating in a single sector.

The draft also proposes limits on asset allocation across government securities, bank fixed deposits, bonds, listed securities and collective investment schemes. It covers provisions on investor registration, good governance, risk management and regulatory oversight.

The final limits, however, will be determined based on ceilings set by the respective regulator.