SEBON Chairman Dr. Gopal Bhatta Outlines Vision: Prioritizing Secondary Market Reforms, Book-Building for IPOs, and 10-Kitta Policy Review

In a candid interview with Merolagani, Dr. Gopal Prasad Bhatta, the newly appointed Chairman of the Nepal Securities Board (SEBON), unveiled an ambitious roadmap for the country's capital market. Appointed on June 19, 2026 (Ashar 5, 2083 BS), Dr. Bhatta takes the helm amidst a challenging market environment, with investor confidence wavering despite expectations of a post-government change rally. His immediate focus is on revitalizing the secondary market and implementing long-awaited reforms, while also strategically reviewing primary market mechanisms.

Dr. Bhatta, who describes himself as an 'Osho Sanyasi,' brings a unique philosophical perspective to his administrative role. He emphasizes that his spiritual practice, which he has maintained for over two decades, is not confined to solitude but thrives amidst the hustle and bustle of daily life. This approach, he believes, allows him to remain calm and centered even while engaging with the complexities of market regulation, viewing his new position at SEBON as another opportunity for 'sadhana' (spiritual practice) in a dynamic environment.

Addressing the prevalent concerns regarding a slowdown in Initial Public Offering (IPO) approvals, Dr. Bhatta clarified that SEBON is not intentionally halting IPOs. Instead, the Board is undertaking a meticulous scrutiny process of all applications based on established financial and other indicators. He highlighted that past IPOs have faced controversies, necessitating a more rigorous review. The primary responsibility, he stressed, lies with merchant bankers to ensure that the companies they bring to the market meet SEBON's stringent standards. He announced plans for imminent discussions with merchant bankers to streamline the process, ensuring that compliant companies receive approvals efficiently, thereby encouraging capital formation.

Looking ahead, Dr. Bhatta expressed his strong conviction that the future of IPO pricing in Nepal lies entirely with the 'Book-Building' method. He views this as a scientific and transparent approach to valuation. To facilitate this, SEBON is actively working on regulating Qualified Institutional Investors (QIIs), assessing their capabilities, and developing guidelines to prevent potential conflicts of interest. A significant part of his vision includes integrating government institutions such as the Employees Provident Fund (EPF), Citizen Investment Trust (CIT), and Social Security Fund (SSF) into the market as institutional investors. He believes their participation will inject much-needed stability and liquidity, aligning with the government's broader economic objectives.

Revolutionizing the secondary market is a cornerstone of Dr. Bhatta's agenda. He outlined a four-stage plan for introducing highly anticipated instruments like 'Short Selling' and 'Intra-Day Trading' by 2027. The first stage involves establishing genuine 'Margin Lending,' where brokers can secure low-cost financing from banks to lend to clients, with shares held under the broker's lien. This will pave the way for 'Intra-Day Trading,' allowing investors to buy and sell securities within the same day. Following this, the 'Security Lending and Borrowing' (SLB) system will be implemented, leading to the final stage: 'Covered Short Selling.' Dr. Bhatta confirmed that a detailed framework, including 13 schedules and a robust risk management plan, has already been prepared and shared with the Ministry of Finance. He emphasized the critical need for technical readiness from NEPSE, CDSC, and brokers to ensure smooth implementation.

Regarding the regulatory framework, SEBON is also initiating the drafting of new legislation, including a dedicated 'Securities Board Act' and a 'Securities Market Management Act' to govern market participants. However, Dr. Bhatta assured that the introduction of new facilities like short selling does not necessitate waiting for new laws. SEBON possesses the authority to implement these through rules, directives, or Standard Operating Procedures (SOPs) that do not conflict with existing acts, allowing for immediate action.

Dr. Bhatta also addressed the ongoing debate surrounding the '10-Kitta' IPO allotment policy. While acknowledging its success in expanding the investor base, he pointed out its drawbacks, particularly for small investors who enter the market without adequate research, increasing their risk exposure. He suggested that for such investors, 'Mutual Funds' or 'Portfolio Management Services' (PMS) offer safer and more professional avenues for market participation. He clarified that SEBON is not looking to abolish the 10-Kitta policy outright but rather to review and refine it for a more systematic and scientific approach, potentially introducing sector-specific mechanisms, especially for hydropower projects or employee allotments. He reassured that no immediate drastic changes to the 10-Kitta policy are planned until the book-building method is fully implemented.

Despite structural challenges, such as the absence of a permanent CEO at NEPSE and delays in institutional decision-making, Dr. Bhatta is committed to a 'bullet-speed' implementation of reforms. He aims to release concept papers for margin lending, SLB, and short selling soon, followed by intra-day trading, seeking public and stakeholder feedback. He stressed the importance of investor education and robust risk management technologies before commencing trading with new instruments. Dr. Bhatta's ambitious agenda, coupled with his disciplined approach, aims to align Nepal's capital market with international standards and contribute significantly to the Finance Minister's vision of making it a leading exchange in Asia.