Kathmandu. Lately, there has been a lot of discussion about the operation of the Sale Guarantee Fund (RAFSAF Fund) in the stock market. However, there is a lot of difficulty in implementing the fund.
The fund was recently registered with PAN for operation. At the same time, there is talk that the fund will be operational, but the implementation is being difficult.
According to Section 27 of the Securities Transaction Operation Bylaws, there is a provision for the operation of the Securities Fund. The members of the Steering Committee include the CEO of CDSC or a senior officer designated by him/her, representatives of securities brokers, senior officers of CDSC and an officer designated by the CEO of NEPSE.
Similarly, the Fund’s secretariat will be located at the NEPSE office.
How much does the fund contribute?
As per the provision, NEPSE, CDSC and share brokers are required to contribute to the fund. According to this, they have to deposit 0.5 percent of their profit annually in the fund. In the last eight years, around Rs 100 million has been deposited in the fund.
Who gets to use TAG_OPEN_strong_46 the fund?
The funds are mainly used by stock brokers. Brokers can borrow up to 75% of their daily trading volume from this fund. This facility is valid for 7 days and the interest rate is 10 percent per annum. If the broker is not able to clear it on time during the day-to-day trading, he could have benefited from this fund. However, due to the lack of operation of the fund, it has to be suspended for not being able to settle it on time.
Why is the fund reluctant?
According to a senior official of NEPSE, the Securities Board of Nepal (SEBON) has done incomplete and erroneous work while clearing the regulations. “The Securities Board of Nepal (SEBON) has made a provision that only 0.5 percent of the profit earned by Nepse, CDSC and brokers should be deposited in the fund,” said the official, adding, “NEPSE had said that all brokers are not always profitable, but the Securities Board of Nepal refused.” ’
“If all the brokers were going for profit, the size of the fund would be bigger,” the official said, “But amidst the fluctuations in the market, the broker will go to profit and also incur losses.” Therefore, the size of the cell was hindered. ’
The official also said that NEPSE has proposed to calculate the commission received by brokers while arranging the RAFSAF fund. “If the amount had been contributed from the commission received by the broker, the size of the fund would have been much bigger today. Because it is the broker who will take advantage of this fund,” the official said.
The official said that even if the fund operation committee is formed, it will not be in a position to give money to the brokers as soon as they need it. “Therefore, a separate management team should be reduced to run the fund. Only in this situation will the implementation of the fund be easier,” the official said.
The official suggested that representatives of NEPSE, CDSC and brokers should now work towards forming a separate fund management team. “It is up to the three parties whether to recruit a separate staff from outside or to hire someone from within the management team,” the official said, “If a separate staff is not deployed, it will be difficult to operate the fund.” ’
What do broker representatives say?
Stock Brokers Association of Nepal’s General Secretary Bhaktiram Ghimire said that the regulatory body has been dilly-dallying in the operation of the RAF.
He said that brokers have no objection to operating the fund based on the provisions of the regulations and working procedures. “First of all, the fund should be brought into operation and then the size of the fund will increase,” he said, “But it is not logical to say that the size of the fund has become small as the fund has not been properly utilized.” ’
According to Ghimire, it is not justified that a separate staff is needed to run the fund. “In today’s age of online, everything is done with one click,” he said, adding, “On top of that, the money used by the fund is transacted online.” Therefore, NEPSE has formed an operation and management committee for the fund. Now, the daily fund business has to be done by deploying an employee. ’
Ghimire expressed his dissatisfaction over the recent hearing that the amount should be contributed to the fund on the basis of broker commission and not on the basis of profit. “Brokers are not the only ones who get commission from the market while trading in shares,” he said, “Securities Board, NEPSE and CDSC also get commission.” ’
Ghimire said that it is difficult to bear the expenses of brokers in today’s technology-friendly and expanding market. “Even in such a situation, if the regulatory body says that the broker should contribute to the fund on the basis of commission, then we are ready to accept it, but the regulator should also reduce the commission received from us by half and deposit that amount in the fund.” ’
Ghimire said that all sides are ready to deposit a part of the commission in the RAFSAF Fund.
