According to the chamber, when CDSC initiates the rule of not automatically converting founder shares into common shares, it will have a long-term impact on the stock market.
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The Nepal Chamber of Commerce has said that the new arrangement proposed in the 'Securities Dematerialization Operation Guideline 2082' recently released by CDS and Clearing Limited (CDSC) is impractical, unfavorable to investment and will create uncertainty in the stock market.
The Chamber said that CDSC has given serious attention to the provision of different ISIN numbers for founders and general public to dematerialized securities and that founder shares are not automatically converted to general public after the locking period.
If the guidelines of CDSC are implemented, the Chamber is of the opinion that there will be a long-term impact on Nepal's stock market, the confidence of investors will be weakened, and there will be a negative impact on the energy sector, cement, hotels, manufacturing industry, media and other sectors in particular.
The chamber has claimed that the proposed arrangement is against international recognition and established practice. The press release issued by the Chamber said, "This directive goes against the interests of investors, and such arrangements will add confusion and insecurity to the investment environment in Nepal's immature capital market."
CDSC has stopped the process of dematerialization of shares for the past few years, but now the decision to stop the automatic conversion to founder shares and to arrange separate ISIN numbers for classification has created a crisis of confidence in the market, according to the Chamber.
The stock market in Nepal is still not investment friendly. In this case, the chamber says that when an organization like CDSC reverses the old standards and brings a new system, it creates a negative psychology in the market.
Chamber has immediately revised this guideline and drawn the serious attention of the government and regulatory bodies to make a practical and investment-friendly arrangement. Otherwise, there is a serious risk of eroding investor confidence, eroding founder shares, and exacerbating the liquidity crisis in the market, the chamber said.
The Chamber has also drawn the attention of the Securities Board to reconsider the guidelines brought by CDSC to develop the overall capital market of Nepal, ensure investment security and maintain the confidence of the private sector.
