SEBON Revises Share Sale Disclosure Rules: Threshold Increased to 15%, Notice Period Reduced to 5 Trading Days

Nepal's Securities Board of Nepal (SEBON) has revised its advance disclosure requirements for the sale of shares by major shareholders following criticism from market participants and concerns over the potential impact on stock market sentiment. Under the revised provision, the share-sale disclosure threshold has been increased from 5% to 15%, while the advance notice period has been reduced to five trading days.

The amendment modifies the directive issued on Bhadra 9 under Section 84(1) of the Securities Act, 2063. The revised framework is intended to provide greater flexibility to major shareholders while maintaining transparency in Nepal's secondary share market.

Key Changes in SEBON's Revised Share Sale Rules

Under the revised arrangement, major shareholders must inform the concerned listed company at least five trading days in advance if they intend to sell 15% or more of their shares after the applicable lock-in period expires.

The company must immediately publish the information through the Nepal Stock Exchange (NEPSE), allowing investors to access important disclosures before making investment decisions.

The validity of the share-sale notice will be three months. This means the disclosure remains valid for the specified period, subject to the applicable regulatory requirements.

Shareholders who announce a planned sale but do not complete the transaction, or who subsequently repurchase shares, must also provide the relevant details to the company. The company is then required to promptly submit the information to NEPSE.

What Has Changed From the Previous Rule?

The revised framework relaxes two important requirements relating to advance disclosure by major shareholders.

• Disclosure threshold: Increased from 5% to 15%.
• Advance notice period: Reduced from 15 days to five trading days.
• Notice validity: Three months.
• Public disclosure: The concerned company must promptly publish the notice through NEPSE.
• Uncompleted sales and repurchases: Relevant information must be reported through the company to NEPSE.

These changes may reduce the compliance burden for major shareholders while preserving a disclosure mechanism for transactions that could influence market expectations.

Why Did SEBON Revise the Disclosure Requirement?

The earlier requirement, which applied a 5% threshold and a 15-day advance notice period, attracted criticism from investors and other stock market participants. Concerns centered on the possibility that strict advance disclosure requirements could create uncertainty, influence investor psychology, and affect trading decisions.

The subsequent revision highlights the importance of balancing investor protection with practical market operations. Regulations need to support transparency without creating unnecessary confusion for listed companies, major shareholders, and ordinary investors.

However, the effectiveness of the revised rule will depend on consistent implementation, timely disclosures, and adequate monitoring by the regulator.

How Could the New Rule Affect NEPSE Investors?

1. Better access to material information

Public disclosure through NEPSE can help investors identify proposed share sales by major shareholders. Such information may be relevant when evaluating a company's ownership structure, potential supply pressure, and market sentiment.

2. Greater flexibility for major shareholders

Raising the threshold to 15% and shortening the notice period to five trading days may offer major shareholders more flexibility when planning share sales after the lock-in period.

3. Possible changes in market sentiment

News of a potential large share sale can influence investor expectations. Some market participants may interpret a planned sale as a possible increase in supply, although a proposed transaction does not automatically indicate that a company is performing poorly or that its share price will decline.

4. Continued importance of regulatory monitoring

The regulator must ensure that disclosure requirements are followed and that material information is communicated promptly. Effective monitoring is also important for detecting potential insider trading, misleading disclosures, and other violations of securities regulations.

Transparency and Investor Protection Must Remain Priorities

Although the revised rule provides additional flexibility, transparency remains essential to a fair and informed securities market. Investors should distinguish between an announced intention to sell shares and an actual completed transaction.

A planned sale by a major shareholder should not be treated as the sole basis for buying or selling a stock. Investors should also assess the company's earnings, financial position, valuation, liquidity, ownership structure, and overall market conditions.

For investors learning to interpret NEPSE disclosures, technical indicators, and company fundamentals, structured financial education can help build a more disciplined decision-making process.

Explore Share Market Training in Nepal and learn more about NEPSE technical analysis.

Conclusion

SEBON's revised share-sale disclosure framework increases the applicable threshold from 5% to 15% and reduces the advance notice period from 15 days to five trading days. The notice remains valid for three months, while companies must promptly disclose relevant information through NEPSE and report details of sales that do not proceed or subsequent repurchases.

The revision addresses concerns about regulatory flexibility, but its long-term effectiveness will depend on transparent implementation, reliable reporting, and strong oversight. For NEPSE investors, understanding regulatory announcements alongside fundamental and technical analysis remains essential to making informed investment decisions.

Disclaimer: This article is for educational and informational purposes only. It is not investment advice. Investors should review official SEBON and NEPSE notices and applicable regulations before making decisions.

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