Introduction
The Securities Board of Nepal (SEBON) has issued a call for the registration of investment companies meeting specific criteria. This follows a decision by the Government of Nepal dated Poush 18, 2081 (January 2, 2025), made under Section 7, Sub-section (2) of the Asset (Money Laundering) Prevention Act, 2064, designating SEBON as the regulatory body for such companies.
This decision is part of Nepal’s broader efforts to strengthen its anti-money laundering (AML) framework, particularly in response to the country’s recent inclusion in the Financial Action Task Force’s (FATF) greylist. The move aims to enhance oversight and ensure compliance with international AML standards.
Scope of SEBON’s Regulatory Authority
SEBON’s regulatory oversight applies to the following categories of investment companies:
| Companies | Basis |
| Investment Companies | Paid-up Capital of NPR 5 Crore |
| Investment Companies | Annual Transaction Volume of NPR 10 Crore |
The eligible investment companies must register with SEBON under Rule 20 of the Asset (Money Laundering) Prevention Regulations, 2081.
Documents Required for Registration
Investment companies must submit the following documents and details to SEBON:
| DESCRIPTION |
| An application for registration with SEBON |
| Details of Board of Directors (Names, Addresses, Contact numbers) |
| Updated Memorandum of Association and Article of Association of the company. |
| Company update letter |
| A copy of the company’s PAN registration certificate |
| Details of Chief Executive Officer (Name, Address and Contact number) |
| A certified copy of the board resolution approving the registration with SEBON |
| Authorization letter from the company board regarding the registration process |
| Audited financial statements, including a report specifying annual transactions and audit findings |
| Documents and details confirming the company’s paid-up capital |
Our Comments
While SEBON’s mandate aims to regulate investment companies, the current framework exhibits certain limitations. SEBON’s mandate applies exclusively to entities registered as “investment companies” with the Company Registrar’s Office for secondary market investments. This excludes a wide range of businesses that actively participate in the stock market but are not classified as investment companies. The current arrangement may discourage corporations from registering as investment companies, potentially leading to the migration of established businesses.
Conclusion
SEBON’s mandate represents a significant step toward regulating investment companies and addressing money laundering risks in Nepal’s capital market. However, the current framework’s narrow focus and potential unintended consequences may hinder its effectiveness.
For further clarification or assistance regarding SEBON’s registration process, please contact us at info@nitipartners.com.