Investors Demand Separate Window for Bulk Share Transactions in Nepal as SEBON Reviews 15-Day Disclosure Rule

Investors Seek Separate Window for Large Share Transactions

Nepal’s capital market is witnessing renewed discussion over how large shareholdings should be sold without creating unnecessary pressure on the regular secondary market.

Investor representatives have urged the Securities Board of Nepal (SEBON) to consider a separate mechanism or trading window for bulk share transactions, particularly when large quantities of promoter or converted shares are sold.

The issue was discussed during a meeting between SEBON officials and investor representatives regarding the recently introduced requirement for major shareholders to provide advance notice before selling significant portions of their holdings.

The discussion focused on whether investors who accumulate large holdings through the secondary market should be treated in the same way as traditional promoters or founding shareholders when they later sell those shares.

Why Are Investors Asking for a Separate Bulk Trading Window?

Large share transactions can have a significant impact on a stock's supply, demand, liquidity and market price.

Investor representatives argued that forcing a large shareholder to sell a substantial holding entirely through the normal NEPSE trading system may create unnecessary selling pressure.

Instead, they have proposed mechanisms such as:

• A dedicated bulk transaction window
• Block or negotiated transactions
• Offer-for-sale mechanisms
• Better systems for transferring and selling formerly locked-in promoter shares
• A transparent database showing major shareholders and changes in their holdings

Such mechanisms could allow large transactions to take place more efficiently while reducing the potential impact on ordinary market trading.

SEBON's existing framework is intended to ensure that information about significant share sales reaches investors before transactions occur. However, market participants have argued that the method of executing large transactions also needs to be considered.

What Is the 15-Day Share Sale Disclosure Rule?

SEBON has introduced a requirement under which a major shareholder intending to sell 5% or more of their shareholding must provide advance information.

Under the framework discussed by SEBON, the shareholder must notify the concerned listed company at least 15 days before the planned sale, with the information subsequently disclosed through NEPSE.

The primary objective is to improve transparency and give ordinary investors access to information about potentially significant changes in ownership.

Large shareholders and promoters may have greater access to information about a company's business, financial condition, management and strategic plans. Therefore, SEBON considers significant sales by such shareholders to be material information for the wider market.

Investors Question Application to Secondary-Market Buyers

One of the major concerns raised during the discussion was whether a person who purchases a large number of shares directly from the secondary market should automatically be subject to the same disclosure requirements as a promoter or founding shareholder.

Investor representatives argued that secondary-market investors may accumulate large holdings over time without having the same status as company founders or promoters.

According to investor representatives, the regulatory framework should distinguish between:

• Original promoters and founding shareholders
• Promoter shares converted into ordinary shares
• Investors accumulating shares through NEPSE
• Institutional and large individual investors
• Shares released after completion of a lock-in period

The objective, they argued, should be to maintain transparency without unnecessarily restricting an investor's ability to sell legally owned assets.

Promoter Shares After Lock-In: What Is the Issue?

Another important issue concerns promoter shares whose lock-in period has expired.

Investors argue that when large quantities of such shares become eligible for sale, forcing the entire volume into the regular trading market could increase selling pressure.

They have therefore suggested alternative mechanisms, including offer-for-sale and bulk or block transactions, depending on the circumstances.

The underlying argument is simple: shareholders should retain the right to sell their assets, but the market should also have an efficient mechanism for absorbing very large transactions.

Why Is Disclosure Important?

Despite the concerns about implementation, SEBON officials have indicated that the principle of disclosure remains important.

The regulator's position is that ordinary investors should know when major shareholders or influential groups are reducing their ownership in a listed company.

A significant shareholder exiting a company may provide important information about:

• Ownership changes
• Management influence
• Corporate governance
• Future supply of shares
• Investor sentiment
• Potential changes in strategic control

Therefore, the debate is not necessarily about eliminating disclosure. Instead, it is increasingly about how disclosure and execution of large transactions can be designed more efficiently.

Separate Bulk Trading Could Reduce Market Pressure

A dedicated mechanism for large share transactions could potentially provide several advantages.

1. Lower Impact on Regular Trading

If a very large order is placed directly into the regular market, it can influence the market price and liquidity. A separate mechanism could help isolate the transaction.

2. Better Price Discovery

A structured bulk or block transaction system could bring large buyers and sellers together more efficiently.

3. Greater Transparency

Transactions could be reported with information about volume, price and ownership changes, allowing investors to understand major market movements.

4. Easier Exit for Large Shareholders

Investors holding large quantities of shares could have a more practical way to sell their holdings without flooding the normal order book.

5. Better Market Infrastructure

As Nepal's capital market develops, mechanisms for institutional investors, high-net-worth investors and large shareholders may become increasingly important.

Bulk Deal vs. Regular Share Market Trading

It is important to distinguish between bulk transactions and ordinary market trades.

In a regular market transaction, buy and sell orders enter the normal order book and interact with available market liquidity.

A large transaction, however, may require a different mechanism because executing a very large order through the ordinary order book can influence price significantly.

International markets commonly use specialized mechanisms for large negotiated transactions. For example, block-deal systems are designed to facilitate large trades separately from ordinary market activity.

Nepal's investors are therefore asking whether similar infrastructure can be developed according to the country's own market size, regulations and technology.

Need for a Major Shareholder Disclosure Portal

Investor representatives have also proposed creating a publicly accessible system showing major shareholder information and changes in ownership.

Such a portal could potentially provide:

• Major shareholder names
• Shareholding percentage
• Changes in ownership
• Shares purchased
• Shares sold
• Promoter-to-public share conversion
• Lock-in expiry information
• Major ownership movements

A centralized and regularly updated disclosure system could improve transparency and help investors make better-informed decisions.

SEBON Faces a Balance Between Transparency and Market Efficiency

The debate highlights a broader challenge for Nepal's securities market.

On one side, SEBON needs to protect ordinary investors through adequate disclosure.

On the other side, regulations should not make legitimate large transactions unnecessarily difficult or cause excessive disruption to the secondary market.

The ideal regulatory framework should therefore balance:

Investor Protection + Transparency + Market Efficiency + Liquidity + Fair Price Discovery

Investor representatives expect SEBON to consider possible amendments after further internal discussions and board-level decisions.

What Could This Mean for NEPSE Investors?

For ordinary investors, large shareholder transactions are important because significant buying or selling can affect a company's supply-demand balance.

Investors should therefore monitor:

• Major shareholder disclosures
• Promoter share conversions
• Lock-in expiry
• Large share-sale announcements
• Bulk transactions
• Institutional buying and selling
• NEPSE trading volume
• Changes in company ownership

However, a large share sale should not automatically be interpreted as a bearish signal. Investors should also examine the company's fundamentals, valuation, earnings, book value, cash flow, debt and future growth prospects before making an investment decision.

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Frequently Asked Questions (FAQ)

What is a bulk share transaction in Nepal?

A bulk share transaction refers generally to a transaction involving a large quantity of shares. Investors have proposed a more structured mechanism for such transactions so that large orders do not unnecessarily disrupt normal NEPSE trading.

Why are investors demanding a separate bulk trading window?

Investors argue that very large share sales executed through the regular market can create significant selling pressure and affect share prices. A separate mechanism could make large transactions more efficient.

What is the 15-day disclosure rule?

The current framework requires a major shareholder selling 5% or more of their holdings to provide advance information, with the sale information disclosed to the market through the prescribed process.

Does the 15-day rule apply to all investors?

The application of the rule to investors who accumulate large holdings through the secondary market has been a subject of concern and discussion among investors and SEBON representatives.

What are promoter shares?

Promoter shares are shares held by a company's founders, promoters or designated controlling shareholders. These shares may be subject to regulatory restrictions and lock-in periods before becoming eligible for ordinary market trading.

What happens when promoter share lock-in expires?

Once applicable restrictions expire, shareholders may be able to sell their eligible shares subject to prevailing laws and regulations. Investors have argued that large quantities should have alternative transaction mechanisms rather than necessarily entering the normal market order book.

Why is shareholder disclosure important?

Disclosure allows ordinary investors to know when major shareholders are increasing or reducing their ownership. This can improve transparency and provide important information for investment decisions.

Could a separate bulk trading window benefit NEPSE?

Potentially. A properly designed system could facilitate large transactions, improve market efficiency and reduce the immediate impact of very large orders on regular trading. The exact structure would depend on SEBON and NEPSE regulations.

Should investors sell a stock when a major shareholder sells?

Not necessarily. A major shareholder sale is only one factor. Investors should also evaluate company fundamentals, valuation, earnings, technical trends, liquidity and their own risk tolerance.

Final Takeaway

The debate over a separate window for bulk share transactions in Nepal reflects the growing need for a more sophisticated capital-market infrastructure.

SEBON's emphasis on disclosure aims to protect ordinary investors by ensuring that major ownership changes are visible to the market. At the same time, investors are asking regulators to provide practical mechanisms for executing large transactions without unnecessarily disturbing normal NEPSE trading.

The eventual solution may require a combination of strong disclosure, transparent ownership reporting, efficient bulk or block transaction mechanisms and investor-friendly market infrastructure.

As Nepal's stock market continues to evolve, understanding these regulatory changes will become increasingly important for both new and experienced investors.