Chapter-2 Provisions Relating to Board

Chapter-2 Provisions Relating to Board

3. Establishment of Board:
(1) There shall be established a Board by the name of Nepal Securities Board in order to regulate and manage the activities of the securities markets and persons involved in securities business by regulating the issue, purchase, sale and exchange of securities in order to develop capital market and protect the interests of investors in securities.

(2) The Board to be established under Sub-section (1) shall consist of the members as follows:-
(a) A person appointed by the Government of Nepal -Chairperson
(b) Joint Secretary, Ministry of Finance -Member
(c) Joint Secretary, Ministry of Law, Justice and Parliamentary Affairs -Member
(d) Representative, Nepal Rastra Bank -Member
(e) Representative, Institute of Chartered Accountants of Nepal -Member
(f) Representative, Federation of Nepalese Chambers of Commerce and Industries -Member
(g) A person nominated by the Government of Nepal from amongst the experts who have obtained at least master’s degree in economics, management, finance, commerce or law from a recognized university and gained at least seven years of experience in stock exchange,management, capital market development, finance and economic sector -Member

(3) The concerned organization shall, in nominating its representative pursuant to Clauses (e) and (f) of Sub-section (2), nominate a person who has obtained at least bachelor’s degree and gained at least seven years of experience in accounts, industry, commerce, finance, banking, economics or law matters.
(4) The tenure of office of the member nominated pursuant to clause (g) of Sub-section (2) shall be three years.
(5) No act or proceeding of the Board shall be affected merely on the reason of any vacancy in office of any member.
(6) An officer employee designated by the Board shall act as the Secretary of the Board.
(7) If the Board thinks it necessary, it may invite any native or foreign expert, adviser to attend its meeting as an observer.
(8) The central office of the Board shall be situated in Kathmandu Valley; and the Board may, as required, open its branch or contact office within or outside of Nepal.

4. Board to be an autonomous and body corporate: (1) The Board shall be an autonomous body corporate having perpetual succession.
(2) The Board shall have a separate seal of its own for all of its acts and proceedings.
(3) The Board may, like an individual, acquire, use, purchase, sell, or otherwise deal with, any movable or immovable property. (4) The Board may, like an individual, sue by its own name and be also sued in the same name.

5. Functions, duties and powers of the Board: The functions, duties and powers of the Board shall be as follows:-
(a) To offer an advice, as per necessity, to the Government of Nepal on matters incidental to the development of capital market,
(b) To register the securities of any corporate body established with the authority to make a public issuance of its securities,
(c) To regulate and systematize the issue, transfer, sale and exchange of registered securities,
(d) To grant permission to any corporate body, which is desirous of operating a stock exchange, to operate the stock exchange subject to this Act or the Rules and bye -laws framed under this Act,
(e) To regulate and monitor the activities of the stock exchange;
(f) To inspect as to whether or not any stock exchange is executing its activities in accordance with this Act or the Rules and Bye-laws framed under this Act, and to suspend or revoke the license of such a stock exchange, if it is found that the same has not been done,
(g) To issue a license to companies or institutions, which are desirous of carrying on the securities business subject to this Act or the Rules and Bye-laws framed under this Act,

(h) To regulate and monitor the activities of securities business person,
(i) To classify securities business persons and fix their standards according to their functions and capability by fulfilling such procedures as prescribed,
(j) To grant a permission to operate collective investment schemes and investment fund programs, and to regulate and monitor the same,
(k) To approve Bye-laws of stock exchanges and those bodies which are related with securities business and engaged in securities transactions, an d to issue orders to stock exchanges and those bodies which are related with securities business and engaged in securities transactions to make necessary amendment in their Bye-laws with a view to making necessary provisions concerning the development of capital market and protecting the interests of investors in securities,
(l) To systematize the clearance of accounts related to securities transactions,
(m) To supervise whether or not security business persons have maintained such conduct as prescribed in this Act or the Rules, Bye-laws and Directives framed under this Act, while carrying on securities business, and suspend or revoke the license to carry on securities business where any securities business person is not found to have maintained such a conduct,
(n) To make or cause to be made, such arrangements as may be necessary to regulate the volume of securities and the mode of securities transactions for the promotion, development and healthy operation of stock exchanges,
(o) To make such arrangements as may be necessary to prevent insider trading or any other offense relating to securities transactions as referred to in Chapter-9 for the protection of the interests of investors in securities,
(p) To review, or cause to be reviewed, financial statements submitted by corporate bodies issuing securities and securities business person, sand give such directives to the concerned corporate bodies as it deems necessary in this connection,
(q) To regulate and make transparent the act of acquiring the ownership of a company there by gaining control over its
(r) To maintain coordination and exchange cooperation with the concerned agencies in order to supervise and regulate matters concerning securities or company affairs,
(s) To perform or cause to be performed such other functions as may be necessary in relation to securities and the development of capital market.

6. Meeting and decision of Board:
(1) The Chairperson shall call the meeting of the Board as per necessity. Such a meeting shall be held at least once a month.
(2) The meeting of the Board shall be held on such date, at such time and at such place as may be specified by the Chairperson.
(3) The meeting of the Board shall be presided over by the Chairperson and by a member chosen by the members from amongst themselves, in the absence of the Chairperson.
(4) Where at least two members request in writing to call a meeting of the Board, the Chairperson shall have to call a meeting of the Board within seven days from the date of receipt of such a notice.
(5) The Secretary of the Board shall provide the agenda to be discussed at the meeting to the members, along with the notice for the meeting.
(6) The presence of more than fifty percent of the total number of members of the Board shall be deemed to have been constituted a quorum for a meeting of the Board.
(7) A majority opinion shall prevail at the meeting of the Board and in the event of a tie; the person presiding over the meeting shall exercise the casting vote.
(8) There shall be maintained a separate minute book recording the names of members present at, matters discussed at and decisions made by each meeting of the Board, and such a book shall be signed by members present.
(9) The decisions made by the Board shall be authenticated by the Secretary of the Board and shall provide to all members.
(10) Other procedures relating to the meeting of the Board shall be as determined by the Board itself.

7. Appointment of Chairperson:
(1) The Government of Nepal shall, subject to Sub-section (2), appoint the Chairperson to act as the administrative chief of, and perform the day-to-day business of the Board.
(2) In making appointment to the office of Chairperson pursuant to Subsection (1), the Government of Nepal shall appoint to the office of Chairperson an appropriate person from amongst the renowned persons who have obtained at least master’s degree and gained at least seven years of experience in the field of stock exchange management, capital market development, economics, finance, commerce, management or law.
(3) There shall be formed a committee under the convenorship of the member of National Planning Commission responsible for the concerned sector and consisting of the Secretary at the Ministry of Finance and an expert in the filed of securities as its members, for recommending a name for the purpose of appointment of Chairperson pursuant to Sub-section (2); and the appointment of Chairperson shall be made pursuant to this Section on recommendation of this committee.
(4) The committee referred to in Sub-section (3) shall, in recommending a name, recommend the names of at least three persons who have possessed the qualification pursuant to this Act.
(5) In recommending a name for the Chairperson pursuant to Subsections (3) and (4), the committee shall determine its Rules of procedures on its own.
(6) The term of office of Chairperson shall be of four years, and he or she may be reappointed for a maximum period of four years.
(7) Notwithstanding anything contained elsewhere in this Section, where the Chairperson commits any act or action contrary to the interests of the Board or the development of capital market and causes any loss and damage to the Board, the Government of Nepal may form an inquiry committee as prescribed and, on recommendation of such a committee, remove him or her from the office of the Chairperson. Provided that prior to so removing from his or her office, the Chairperson shall be provided with appropriate opportunity to defend himself or herself.

8. Functions, duties and powers of the Chairperson: (1) The functions, duties and powers of the Chairperson shall be as follows: (a) To perform such functions as may be necessary for the protection of the interests of investors in securities for the development of capital market,
(b) To regulate and monitor, or cause to be regulated and monitored, stock exchanges and transactions of securities business persons in order to make transactions in securities strengthened, effective and reliable,
(c) To act as the executive chief of the Board,
(d) To submit such long-term and short-term plans and policies as be necessary to be adopted by the Board for the management of stock exchanges and development of capital market to the Board for its approval,
(e) To call or cause to be called the meeting of the Board and preside over the same,
(f) To prepare annual programs and budget of the Board and submit the same to the Board for its approval,
(g) To implement or cause to be implemented the decisions made by the Board,
(h) To inspect and supervise day-to-day business of the Board and perform the functions in accordance with the objectives of the Board,
(i) To appoint the advisers and employees required for the Board as prescribed,
(j) To perform or cause to be performed such other functions as may be entrusted to him or her by the Board (2) The functions, duties and powers of the Chairperson, other than those referred to in Sub-section (1) shall be as prescribed.

9. Remuneration, meeting allowance and other facilities of Chairperson and member: The remuneration, meeting allowance and facility entitled to, by the Chairperson and member and daily and traveling allowance entitled to, by the Chairperson and member while making travel within or outside Nepal shall be as prescribed.

10. Qualification of Chairperson and member: In order to be appointed as a Chairperson or a member, as the case may be, a person shall have to possess the qualification as follows:- (a) One who is a citizen of Nepal,
(b) One who has maintained high moral character,
(c) One who has gained at least seven years of professional experience in the field of stock exchange management, capital market development, economics, finance, commerce, management or law, and
(d) One who is not disqualified under Section 11.

11. Disqualification of Chairperson and member: Any of the following persons shall not be eligible to be appointed to the office of Chairperson or member, as the case may be:-

(a) One who is an officer-bearer of a political party,
(b) A person involved in securities business,
(c) One who is adjudicated as an insolvent,
(d) One who is insane,
(e) One who has been convicted by the court of an offense involving moral turpitude.

12. Circumstances on which a Chairperson and a member may be removed from office: (1) Where there occurs a circumstance for removal of the Chairperson or the member referred to in subsection (2), the Government of Nepal shall remove the Chairperson and member, as the case may be. Provided that prior to making such a removal, the Government of Nepal shall not deprive the concerned person of a reasonable opportunity to defend him/herself.

(2) The Chairperson and the member, as the case may be, shall be removed from the office in any of the following circumstances:- (a) If one is disqualified to be a Chairperson and a member, as the case may be, pursuant to Section 11,
(b) If one commits any act contrary to the interest of investors in securities or any act that may cause loss or damage to the development of capital market,
(c) If one suffers from lack of competence to implement, or cause to be implemented, such functions required to be performed by the Board to attain the objectives of the Board pursuant to this Act or the Rules framed under this Act,
(d) If one has been held disqualified to carry on any occupation or business by the reason of misconduct and his or her certificate has been revoked or he or she has thus been restricted to carry on a business,
(e) If one remains absent from three consecutive meetings of the Board without giving a notice.

13. Resignation of Chairperson and member: The Chairperson or the member, as the case may be, may relieve of his or her office by tendering a resignation in writing to the Government of Nepal.

14. Fulfillment of vacancy: If the office of the Chairperson or any member falls vacant prior to the completion of his/her tenure of office, the Government of Nepal shall appoint any person to that vacancy for the remaining period of tenure by fulfilling the procedures as referred to in this Act.

15. Proceeding not to be invalid: No act or proceeding of the Board shall be invalid merely by the reason of any defect in the appointment of the Chairperson or member, as the case may be, or the formation of the Board or vacancy in office of the Chairperson or any member.

16. Powers to form committee or sub-committee:

(1) The Board may, form any committee or sub-committee, as per necessity, for the operation of its business. Such a member as specified by the Board shall be the coordinator of the committee or sub-committee, as the case may be, so formed. (2) The functions, duties, powers, terms of reference, meeting allowance and procedures of the committee or subcommittee, as the case may be, formed pursuant to Sub-section (1) shall be as prescribed by the Board.

17. Delegation of powers: (1) The Board may, as per necessity, delegate any of the powers conferred to it to the Chairperson, any member or any committee or sub-committee, as the case may be, formed pursuant to Section 16.

(2) The Chairperson may, as per necessity, delegate any of the powers conferred to him or her to any member, any committee or sub-committee, as the case may be, formed pursuant to Section 16 or any employee of the Board.

18. Requirement of disclosure in regard to conflict of interest: Where any proposal in which any member has direct or indirect personal interest is to be discussed at the meeting of the Board, such a member shall give information as to such interest to the Board prior to the commencement of discussion on such matter. Except so permitted by the Board, such a member shall not be entitled to participate in the discussion and decision of such a matter and cast his or her vote thereon. Provided that the presence of such a member shall be valid in order to constitute a quorum of the meeting.

19. Provisions relating to accounts experts, advisors and employees: (1) The Board shall have such numbers of accounts experts, advisors and employees as may be necessary for the efficient operation of the functions of the Board.
(2) The appointment, remuneration, facilities and terms and conditions of service of the accounts experts, advisors and employees of the Board shall be as prescribed.

20. To take oath: The Chairperson, member, advisor and employee of the Board appointed for the first time in the Board shall, prior to assuming the functions of their office, take an oath of secrecy and honesty, as prescribed.

21. Secrecy: (1)No Chairperson, member, advisor, employee, auditor, agent or representative of the Board shall perform the following business:- (a) To supply or disclose any confidential information or notice obtained in the course of performing the duties of office to another person,
(b) To use such information or notice for personal benefits.

(2) Notwithstanding anything contained in Sub-section (1), any confidential information or notice may be disclosed on the following circumstances known to him or her in accordance with the procedures as specified by the Board:-
(a) Where the disclosure of such information or notice has been made in performing one’s duty publicly, rendering assistance to any law enforcing authority, carrying out an order given by a court or competent authority,
(b) Where such information or notice has been supplied to the external auditor of the Board in the course of performing one’s duties,
(c) Where such information or notice has been disclosed in the interests of the Board in the course of legal proceedings.

22. Fund of Board: (1) The Board shall have a separate fund of its own.

(2) The following amounts shall be credited to the fund as referred to in Sub-section (1):-

(a) Amounts received from the Government of Nepal,
(b) Amounts obtained as grants, assistance or loans from any native, foreign or international organizations, institutions or bodies, Provided that prior approval of the Government of Nepal shall be obtained in receiving such grants, assistance or loans.
(c) Amounts received by way of the license fees,
(d) Amounts received by way of the fees for registration of securities,
(e) Amounts received by way of the fees, charges, dues for transactions in securities,
(f) Amounts received by way of fines imposed by the Board,
(g) Amounts received from any other sources. (3) All amounts to be obtained to the fund of the Board pursuant to Sub-section (1) shall be credited to an account to be opened with any commercial bank within Nepal.

(4) All the expenditures t o be made on behalf of the Board shall be chargeable on the fund as referred to in Sub-section (1).

(5) In making expenditures pursuant to Sub-section (4), such expenditures shall be made subject to the budget approved by the Board for the incomes and expenditures to be made in each fiscal year.

(6) The operation of the fund of the Board shall be as prescribed.

23. Provision of revolving fund: (1) The Board may establish a revolving fund to manage its source of income and such amounts as specified by the Board shall be credited to that fund each year.
(2) The amounts of the revolving fund may be held in securities issued by the Government of Nepal or in such a periodic account as may be prescribed by the Board.
(3) Generally, no moneys held in the revolving fund, other than income earned out of the moneys in that fund, shall be spent.
(4) Provisions relating to the operation of the revolving fund shall be as prescribed.

24. Accounts of Board: (1) The Board shall have to maintain updated records of its activities.
(2) The Board shall have to maintain accounts of its incomes and expenditures, balance sheet and accounting details of each fiscal year in accordance with accounting system conforming to international practice no later than six months after the expiry of such a fiscal year.

25. Auditor and audit: (1) The accounts and books of the Board shall be audited by the Auditor General or any auditor designated by him. (2) While auditing the accounts and books of the Board, by the auditor appointed pursuant to Sub-section (1), such an auditor shall mention, inter alia, the following matters in his or her audit report:
(a) Whether the statements of incomes and expenditures truly reflect the incomes and expenditures of the Board in that fiscal year,
(b) Whether the balance sheet of that fiscal year reflects the true economic condition of the Board.

26. Annual report: (1) The Chairperson shall have to present an annual report of the activities of the Board before the Board no later than four months after the expiry of each fiscal year and also provide a copy of such a report to the Government of Nepal.
(2) The Chairperson shall in each year make public the annual report of the Board as referred to in Sub-section (1).