Nepal Stock Exchange (Nepse) has directed banks and financial institutions (BFIs) to make public their capital-hike plan only after the approval of the Nepal Rastra Bank, warning a failure to do so would be punishable as per the Securities Act.

The Nepse said unofficial statements about the plans could influence the market, causing losses to many while benefiting a few.

The plan should be made public through either chief executive officer or company secretary or spokesperson only after the central bank’s approval,” Nepse said in a statement. “We have directed the BFIs that they should make pubic only authentic information through authorised persons,” said Nepse General Manager Sitaram Thapaliya.

“We will write to the Securities Board of Nepal to punish any BFIs making public comments without official decision and through unofficial persons.”

Clause 96 of the Securities Act has defined any person or person in association with others influences the market to increase, decrease and stabilise the stock price as insider trading. Also, the Clause 97 has defined any person or person in association with others spreading misleading information as insider trading.

The Nepse has said those failing to follow the aforementioned clauses would be punished as per the Clause 101 of the Act. According to the Clause 101, those influencing the market shall be liable to the punishment with a fine of Rs50,000-100,000 or with imprisonment for a term not exceeding one year or with both

punishments, and where anyone has suffered any loss or damage from such an act, such loss or damage has also to be recovered.

“We will treat the unauthentic comments from unauthorised persons as misleading information and recommendation for penalty will be made to the Sebon,” said Thapaliya.

Ever since the NRB directed the BFIs to increase their paid-up capital fourfold through the monetary policy, banks officials have been talking about their capital-hike and merger plans.

The central bank’s move to raise the paid-up capital requirements for the BFIs has been attributed for the bull run at the capital market. Investors are rushing to purchase bank shares expecting that they would issue right’s and bonus shares to meet the new capital requirements. On the Tuesday, the market Nepse index closed at 1159.93 points.

As per the  central bank’s directive, commercial banks have to increase their capital to Rs8 billion from current Rs2 billion, national level development banks have to hike their capital to Rs2.5 billion from current Rs640 million and national level finance companies should increase their capital to Rs800 million from Rs200 million.

The central bank has asked them to submit their capital plan by mid-September.