Chapter-5 Provisions Relation to License to Carry on Securities Business

56. License to be obtained to carry on securities business: (1) A company or body desirous of carrying on securities business has to obtain a license to carry on securities business from the Board pursuant to this Act. (2) No one shall carry on securities business without obtaining a license to carry on securities business from the Board pursuant to this Act.

57. Application for license to carry on dealing in securities: (1) A company or body desirous of carrying on dealing in securities has to make an application to the Board for a license to carry on securities business, in such form and accompanied by such details, documents and fees as may be prescribed.

(2) The application to be made pursuant to Sub-section (1) shall specify the following matters:- (a) Type of securities business and services to be provided, (b) If an agent is to be appointed to carry on securities business and if such business is to be carried on in collaboration with others, matters pertaining thereto, (c) In the case of those business persons, as prescribed, who are allowed to carry on business only upon obtaining a membership of a stock exchange, a recommendation letter of the concerned stock exchange, (d) Grounds proving the ability to carry on the proposed securities business and such other information as may be specified by the Board.

58. A license to carry on securities business to issue: (1) If an application is received pursuant to Section 57, the Board may hold necessary inquiry and issue a license to carry on securities business in such format as prescribed, to the applicant on the following grounds:- (a) If it thinks that, based on the conditions set forth in Sub-section (2), the applicant is able to carry on securities business subject to this Act or the Rules and Bye-laws framed under this Act, (b) Training and education qualification gained by the agent appointed to carry on securities business.

(2) The following matters shall also be considered in relation to the chief executive, director, concerned officers and agents serving in the company or body making application for the license to carry on securities business:- (a) Financial status, (b) Educational qualification, training and experience in the relevant work, (c) Experience required to carry on securities business, (d) Social status and character.

(3) Notwithstanding anything contained above in this Section, a license to carry on securities business other than securities brokerage and investment consultancy service shall be issued only to a public limited company or a body corporate established under the laws in force.

(4) Notwithstanding anything contained elsewhere in this Act, the Board may, having regard to the interests of capital market and investors in securities, so issue a license to any securities business person that such person is restrained from carrying on any securities, business out of the types of securities business.

59. Board to specify terms and conditions: (1) In issuing a license to carry on securities business, the Board may specify necessary terms and conditions, having regard to the condition of capital market, healthy operation of securities business and interest of investors.

(2) It shall be the duty of the company or body having obtained a license to carry on securities business to comply with the terms and conditions specified by the Board pursuant to subsection (1).

(3) The Board may make necessary modifications and alteration in the terms and conditions specified pursuant to Sub-section (1), having regard to the condition of capital market, healthy operation of securities business and interest of investors. 60. Power to refuse to issue a license to carry on securities business: The Board may refuse to issue a license to carry on securities business to any company or body on the following circumstances:- (a) if it is proved that such company or body has been insolvent upon being unable to repay debts to creditors,

(b) if the application to be made for such a license is not accompanied by such documents and details as required to be accompanied under this Act or the Rules framed under this Act or such other matter as may be specified by the Board, (c) if, upon considering the matters set forth in subsection (2) of Section 58, it is not appropriate to issue a license to carry on securities business.

61. Validity and renewal of a license to carry on securities business: (1) The license issued to a securities business person to carry on securities business under this Act shall remain valid only until the end of that fiscal year in which it has been issued.

(2) The securities business shall have to get such a license renewed by paying the annual fees as prescribed to the Board within three months from the date of expiry of each fiscal year.

(3) In the event of failure to get a license renewed by paying the annual fees within the time-limit referred to in subsection (2), such license may be got renewed by paying a fine of twenty-five percent of the annual fees up to three months from the date of expiry of that time limit.

(4) The Board shall revoke the license of a securities business person who has failed to get such a license renewed even within the time-limit referred to in Sub-section (3), and publish a notice thereof for information to the general public.

62. Power to prescribe for carrying on securities business through a subsidiary company: Notwithstanding anything contained elsewhere in this Act, the Government of Nepal may, on the recommendation of the Board and by notification in the Nepal Gazette, prescribe that a bank or financial institution established under the laws in force is entitled to carry on securities business only through its subsidiary company. Provided that such a subsidiary company shall not be entitled to do other acts except the dealing in securities.

63. Types of securities business: (1) For the purposes of this Act, the securities business shall be divided into the following types:- (a) Securities brokerage,
(b) Securities trade,
(c) Issue and sales management,
(d) Investment management,
(e) Investment consultancy service,
(f) Collective investment fund management,
(g) Securities registration or securities central deposit service or custodial service,
(h) Service relating to the settlement of the account of securities transactions,
(i) Market maker,
(j) Such other business as may be specified by the Board to be a securities business.

(2) The scope and other provisions of the securities business referred to in Sub-section (1) shall be as prescribed. 64. License not to be issued to carry on securities business without specifying agent: (1) No license shall be issued to any one to carry on securities business as a securities broker without specifying at least one person to act as an agent of the securities broker. (2) No license shall be issued to any one to carry on securities business as a securities trader without specifying at least one person to act as an agent of the securities trader.

(3) No license shall be issued to any one to carry on securities business relating to collective investment scheme and investment fund management without specifying at least one person to act as an agent of the scheme manager.

(4) The procedures to be fulfilled in specifying an agent by a securities business person, qualification of the agent and provisions relating thereto shall be as prescribed.

65. Formal agent: (1) Only after the registration of the appointment of any person as an agent of a securities business person with the Board pursuant to Sub-section (3), such a person shall be deemed to be a formal agent for that securities business.

(2) In making registration of the appointment of an agent with the Board pursuant to Sub-section (1), the securities business person shall inform the Board about the appointment of such agent and the person to be appointed as an agent shall also inform the Board that he or she agrees to be an agent of such a securities business person.

(3) Upon receipt of the notice pursuant to Sub-section (2), the Board shall, within fifteen days, make entry in the register as prescribed, specifying the name, address and other necessary details of the agent and issue the agent registration certificate to such an agent.

(4) If the agreement made between the agent and the securities business person appointing the agent is canceled, for any reason whatsoever, information thereof shall be given to the Board immediately, and the agent shall also return the certificate obtained by him or her to the Board within seven days.

(5) The securities business person who appoints a formal agent shall be responsible for all acts done by such a formal agent.

66. Rights of securities business person: (1) No license to carry on securities business obtained by a securities business person shall be suspended or revoked without providing such a securities business person with a reasonable opportunity of hearing. (2) In suspending or revoking a license to carry on securities business, information thereof shall be given in writing to the concerned securities business person, and such a notice shall indicate the reasons for such suspension or revocation, date of entry into force of such suspension or revocation and the period of suspension, in the case of suspension.

(3) A securities business person who is dissatisfied with the decision made to suspend or revoke a license obtained by such a securities business person to carry on securities business person may make an appeal to the concerned Appellate Court within thirty five days from the date of such decision.

67. Minimum capital and financial source of securities business person: (1) A securities business person shall, in carrying on the securities business, maintain the minimum capital and financial source as prescribed.
(2) If a securities business person fails to maintain the minimum capital and financial sources required to be maintained pursuant to Sub-section (1), information thereof shall be given to the Board immediately.
(3) If the Board receives the information referred to in Sub-section (2), it may immediately order such a securities business person to maintain the minimum capital and financial source as prescribed or give other necessary directives in that regard.

68. To maintain records of securities business persons:
(1) The Board shall maintain a register of all licensed securities business persons and maintain updated records in the register.
(2) The following matters shall also be specified in the register to be maintained pursuant to Sub-section (1) and updated records of securities business persons maintained therein:-
(a) Names and addresses of securities business persons,
(b) Date of issue of license to securities business persons,
(c) Types of securities business,
(d) Terms and conditions specified in the license,
(e) Names and addresses of the formal agents,
(f) Names and addresses of managers and officers,
(g) Place where documents and records pertaining to securities business are kept,
(h) Names of the directors of company or body, names of company secretaries and name of each shareholder and number of shares held by such a shareholder,
(i) Such other details as the Board considers necessary and appropriate.

69. Records of formal agents: (1) The Board shall maintain a register of all formal agents and maintain updated records in the register.

(2) The register to be established pursuant to Sub-section (1) shall, inter alia, contain the following matters and also updated records of formal agents shall be maintained therein:-
(a) Name and address of formal agent,
(b) Date of registration as formal agent,
(c) Name and address of securities business person appointing agents,
(d) Such other details as the Board considers necessary and appropriate.

70. Information to be given: The securities business person shall, on any of the following circumstances, give information in writing thereof to the Board within seven days from the date of such occurrence:-
(a) If the securities business person ceases to carry on the securities business specified in the license,
(b) If any formal agent ceases to act in such capacity,
(c) If any alteration is made in any details set forth in the register maintained pursuant to Section 68.