FAQS
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The shares, bonds, debentures issued by corporate bodies, units issued by mutual funds, or treasury bonds, saving bonds or bonds issued by the Government of Nepal and such other securities specified by Securities Board of Nepal to be transacted or transferable through the stock exchange or the instrument to purchase, sell or exchange such securities.
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A Share means a single unit of ownership in a company of the person holding it. It is an indivisible unit of “share capital” of the company. The denominated value of a share is called face value whose market value may differ based on various market factor. For example: Company A’s share capital is Rs. 100,000; the face value of it share is Rs. 100. This means Company A has 1,000 shares in total. If a person holds 100 shares of Company A, then his/her ownership to the income and/or assets (liabilities) of the company is 10% (100/1000).
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Debenture/bond is a debt instrument issued by the institution with a condition that the issuing institution shall pay interest at a rate fixed at the time of issuance and the principle at its maturity. The interest may be paid semi-annually or annually. A debenture normally has a face value of Rs. 1,000.
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Stock exchange is a market where securities are traded. The one and only stock exchange of Nepal is Nepal Stock Exchange (NEPSE).
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Ordinary share also known as common share is share of a company having right to vote in company’s meeting. It represents a normal equity ownership of a company. The holders of ordinary shares are entitled to receive proportionate profit of the company (dividend) as decided by the company’s management. The dividend to ordinary shareholders are paid only after payment of preference shareholders.
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Preference share means the share of a company having right to receive dividend before payment of ordinary share. Preference shareholders are to be paid before ordinary shareholders if the company enters bankruptcy. Based on terms specified at the time of issuance, preference shareholders are entitled to receive dividend even for year(s) when the company suffers loss.
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Primary market of securities refers to the market where investors can buy the securities directly from the issuing company (through issue manager). In a primary market, investors buy new securities which were never in existence before. In Nepal, this kind of issue is popularly known as Initial Public Offering (IPO). While issuing securities at primary market, the sale proceeds directly goes to the issuing company.
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Unlike primary market, secondary market is a market where the investors buy securities from another inventors through stock brokers. The sale proceeds of a transaction carried at secondary market goes to the investor selling securities. The transaction in secondary market attracts addition fees and charges like: broker commission, SEBON fees and DP Charge.
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The securities bought at IPO can be sold only after it is listed with stock exchange i.e. NEPSE. After the securities are listed, the investors can sell the securities through stockbrokers.
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The securities already listed in NEPSE can be bought/sold through stockbrokers. The investor shall update KYC with the broker before being able to buy/sell listed securities.
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Book closure is a time period during which a company will not execute the transfer of shares of the company. The consequence of book closure is that the investor buying share after book closure is not entitled to participate in the meeting of the company, receive dividend (cash or stock) or right share for the year for which book has been closed.
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A depository is an entity which facilitates the holding and/or transacting securities in book entry/electronic form. It is a kind of “bank for securities” like: shares, debentures, bonds, etc. It also facilitates transactions in the securities held by it.
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CDS and Clearing Limited (CDSC) is acting in the capacity of depository in Nepal.
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The following parties are involved with CDSC:
- Beneficial Owner (BO)
- Depository Participant (DP)
- Issuer
- Registrar and Transfer Agent (RTA)
- Stock Brokers
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BO is a person (individual or institution) who has opened a Demat Account with the depository.
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A DP is an agent of the depository who is authorized to offer depository services to investors.
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Bank and financial institutions, stock brokers, registrar and transfer agent, and other as prescribed by SEBON from time to time complying with the requirements prescribed by SEBON can be registered as DP.
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Issuer is a company/institution whose securities have been issued publicly.
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RTA is an institution who on behalf of any corporate body, maintains the records of holders of securities issued by such body corporate and deals with all matters connected with the transfer and redemption of its securities.
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A stockbroker or most commonly known as broker is an institution which executes buy and sell orders for stocks and other securities on behalf of clients.
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Demat account is similar to bank account in which securities like: shares, debentures, mutual fund units are held in the electronic form. When the BO purchases securities, the securities are deposited in BO’s demat account and when the securities are sold, the securities so sold are deducted from the account.
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BOID is a unique 16 digit identification number given to BO which is generated only when BO opens the demat account in CDSC through an authorized DP. BOID must be mentioned in all future transactions. BOID cannot be duplicate. It means two BOs cannot have same BOID which replicates that the securities cannot be transferred into the wrong account. BOID has two sections: DPID and Client ID. The first 8 digits represent the DPID and last 8 digits represent the Client ID.
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“Dematerialization” is a process by which physical certificates are converted into electronic form.
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Rematerialization is the process of converting securities held in electronic form in a demat account back in physical certificate form.
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“ISIN” is a unique 12 digit alphanumeric code given to a security like: shares, debentures, mutual fund units etc. when the security is admitted in the depository system. First two digits of the ISIN code indicate country of registration. For all securities registered in depository in Nepal, first two digits of the ISIN code are ‘NP’.
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No, different securities issued by the same issuer will have different ISIN code.
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Following services are provided by a depository to the beneficial owners but of course, through a depository participant:
- Demat account opening
- Dematerialization of securities
- Maintaining record of securities in electronic form
- Settlement of trades executed on NPESE (On market trades) by transferring/receiving the securities to/from demat account
- Settlement of trades executed outside NPESE (Off-market trades)
- Facilitating pledge/unpledged/freeze/unfreeze of dematerialized securities
- Providing electronic credit in respect of securities allotted by issuers under IPO/Right/Bonus etc.
- Providing statement of securities held by the customer
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No. A demat account cannot be opened directly with Depository. It has to be opened only through a DP of Depository.
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A person can open up to two demat accounts in two different DPs; more than one demat account in same DP is not possible.
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No. An investor can open demat account with the DP of his/her choice and carry on trading through broker of his choice.
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No. A demat account can be opened in a single name only.
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Yes. However, the account will be operated by a guardian till the minor becomes major. Guardian has to be the father or in his absence mother. In absence of both, father or mother, the guardian can be appointed by court.
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No
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For trading, dematerialization is compulsory. However, the investors already holding securities in physical form can hold the certificates in physical form.
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Depository does not levy any charge for dematerialization of securities.
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- Citizenship Certificate
- Passport Size Photo (1)
- DEMAT Confirmation (Can be downloaded in PDF format from the Mero Share app)
- PAN
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- Guardian Citizenship Certificate
- Birth Certificate
- Guardian Passport Size Photo (1)
- DEMAT Confirmation (Can be downloaded in PDF format from the Mero Share app)
- Passport Size Photo