The Securities Board of Nepal (SEBON), the capital market regulator of Nepal,  is set to regulate investment companies in Nepal with new enlisting and compliance rules. Here’s what it means for investment companies, investors, and the capital market.

Let’s face it, investment regulations don’t usually make for thrilling reading. But hold on, because this one actually matters.

The Securities Board of Nepal (SEBON) has just rolled out a new set of rules that’s about to shake things up in Nepal’s financial and investment space. Whether you’re an entrepreneur running an investment company, a casual investor, or just someone who cares about how safe your money is, this new move will likely affect you in one way or another.

Let’s break it down!

So, What’s Happening?

In simple terms, SEBON just said:

"If you’re an investment company big enough to handle significant money, it’s time you play by some solid, transparent rules."

Translation: If your company deals with a substantial amount of other people’s money, you now need to get registered at SEBON, report your operations properly, and be held accountable.

But this move isn’t just about ticking boxes or filling out forms. It’s about building a financial ecosystem where trust, transparency, and compliance are the foundation, not an afterthought.

This is following the Nepal Government’s decision to designate SEBON as the regulatory authority for certain investment companies. In accordance with the authority granted under Section 7 (na), Sub-section (2) of the Asset (Money Laundering) Prevention Act, 2064, and based on the recommendation of the Coordination Committee, the government has officially designated SEBON as the regulatory body for big investment companies that meet specific criteria.

This means SEBON now has the legal power, not just the intent, to oversee how large investment companies operate, ensuring they follow structured rules, disclose properly, and operate in the interest of financial integrity.

Wasn’t SEBON Already Regulating All Investments in Nepal?

The short answer is No! SEBON was not regulating all types of investments in Nepal.
Rather, SEBON's role has traditionally been limited to regulating capital markets, not all forms of investment activities in the broader financial or business ecosystem.

Let’s clarify the distinction:

What SEBON Has Always Regulated:

SEBON, under the Securities Act, 2063, is the apex regulator for Nepal’s securities market. That includes:

• Public issue of securities and trading (shares, debentures, mutual funds, etc.)
• Stock exchanges and brokers
• Merchant banks, mutual funds, portfolio managers
• Securities-related investment instruments
• Collective investment schemes (like mutual funds)
• Public offerings (IPOs, FPOs, Rights shares, etc.)

So yes, SEBON has always regulated investments made through securities markets, but not all kinds of investments made by companies or individuals outside this space.

Certain Investment Companies Already Registered & Regulated by SEBON

There are investment fund managers like Adhyanta Fund Management Limited or Global Equity Fund Limited registered with SEBON. In fact, these companies have obtained a license from the SEBON. These companies are called Specialized Investment Fund Managers (SIFMs). They are registered under a separate set of rules designed specifically for managing private equity, venture capital, or alternative investment funds.

What SEBON Has Not Traditionally Regulated

Before the recent notice, SEBON did not directly regulate investment companies that were privately investing in assets unless those investments involved securities or were structured under collective investment schemes that fall under SEBON’s jurisdiction.

For example:

Private firms that pooled money and invested in real estate, non-listed companies, startups, commodities, gold, etc. were not directly monitored by SEBON unless they were issuing securities to the public.

Similarly, companies acting as investment holding firms or financial investors often registered under the Companies Act operated with limited oversight, especially if their transactions weren’t tied to publicly traded securities.

So, some active and well known PE/VC companies like Business Oxygen, True North Associates, Team Ventures were not regulated by the SEBON earlier.  

Why the Recent SEBON Notice Matters So Much:

The recent SEBON notice marks a clear expansion of SEBON’s regulatory boundaries. It is now, for the first time:

• Formally regulating investment companies based on their size (capital or transaction volume), not just on the type of securities they deal with.
• Drawing these companies under a compliance and reporting framework, even if they don’t directly operate in public securities markets.
• Doing so under the delegated authority from the Money Laundering Prevention Act, not just the Securities Act.

This is a major step toward regulating the broader "investment ecosystem" in Nepal, which previously operated in a regulatory grey area.

Importantly, this move is part of a broader reform agenda. SEBON has also introduced new financial sanctions rules to prevent misuse of the capital market for money laundering and terrorism financing. If you want to understand the bigger picture of how Nepal’s financial system is being strengthened, don’t miss this related read:

SEBON’s New Financial Sanctions Rules: What It Means for Investors & Businesses in Nepal

What is an "Investment Company"? Is It Legally Defined Under Nepali Law?

As of now, there is no specific, codified legal definition of "investment company" under any standalone law in Nepal, meaning you won't find a clause in the Companies Act, 2063, the Securities Act, 2063, or any other central law that provides a precise, universally accepted legal definition of an “investment company.”

However, investment companies are recognized and governed in practice through a combination of legal frameworks and regulatory directives:

1. Companies Act, 2063 (2006)

Investment companies are generally registered under this law as private or public companies. While the Act does not define “investment company” per se, many companies identify themselves as such in their objectives clause (in the MOA), stating that they operate to invest in shares, debentures, mutual funds, real estate, etc. Proviso to Section 176 (1)  has a mention of companies selling/buying securities or having investment as the sole primary objective. So, such companies may be interpreted to be “investment companies”.  

2. Securities Act, 2063 (2007)

This Act provides SEBON with regulatory power over capital market participants. Although it does not define “investment company,” SEBON uses this authority to regulate companies involved in securities trading, portfolio management, and collective investment schemes  which often includes investment companies by function.

3. Money Laundering Prevention Act, 2064 (2008)

SEBON’s recent regulatory initiative to oversee investment companies stems from powers delegated under this Act particularly Section 7 (na), Sub-section (2). Under this provision, the government can designate a regulatory body (SEBON, in this case) to oversee certain types of businesses based on risk exposure related to money laundering and financial transactions. SEBON’s latest notice, issued under this authority, now categorizes investment companies based on capital and transaction volume and brings them under a formal compliance regime.

4. Industrial Enterprises Act, 2076 (2020)

Though the Act does not provide any specific definition, it lists “investment company” under the service oriented industry in Annexure 8.   

So ideally an investment company is a company that primarily is engaged in buying and/or selling of securities or has investment as the primary objective. 

Which Investment Companies Should Be Paying Attention?

This isn’t just a blanket announcement. SEBON has made it crystal clear who is affected by this new rule. If your investment company fits into any of the following categories, you’re now on SEBON’s radar:

1. Investment companies with a paid-up capital of Rs 5 crore or more; or
2. Investment companies with annual transactions exceeding Rs 10 crore

These may seem like high thresholds at first glance, but let’s not forget that Nepal’s investment industry is growing rapidly. Many mid-sized companies are approaching these benchmarks and will need to prepare accordingly. Even if you’re not there yet, this is your cue to start thinking ahead.

What Kind of Homework Are We Talking About?

Don’t worry,  it’s not a college exam. But yes, SEBON has introduced a mandatory checklist, and it’s serious business.

Here’s what your company must submit to SEBON to be listed and operate legally under this new regulation:

1. Application for Registration
   A formal request showing that your company wants to be officially listed under SEBON’s regulatory framework.
    
2. Details of Directors, CEO, and Shareholders
   SEBON wants to know who’s running the company, who owns it, and who is making the decisions.
    
3. Company Documentation
   This includes the Memorandum of Association (MOA), Articles of Association (AOA), and certified updates on your company’s structure.
    
4. Tax Documents
   A valid tax registration certificate and your most recent audit report to show that your financial house is in order.
    
5. Criminal Clearance Certificate
   Yes, this is now a requirement. It ensures that those managing large sums of public money have a clean track record.
    
6. Board Resolution and Power of Attorney
   A documented decision by your board of directors approving the registration, and a formal authorization for the person managing the process.
    
7. Proof of Capital and Registered Address
   SEBON needs confirmation that your company’s claimed capital is legitimate and that you have a proper business location.
    
8. Bank Account Details
   A record of your company’s operational bank accounts,  another layer of traceability and accountability.

This list may seem extensive, but at its core, it’s about one thing: accountability. If you’re managing public money, it’s only fair that you’re held to a higher standard.

Why Is The Government Appointing SEBON As The Regulator Now?

The financial sector in Nepal is evolving faster than ever before. There’s more money, more companies, and more people getting involved, and that’s a great thing. But growth, if left unchecked, also comes with risks, loopholes, and room for abuse.

In recent years, many investment companies have operated in a loosely regulated space. Some have raised funds without clearly disclosing how they plan to use them. Others have taken part in speculative investments that have left investors in the dark.

This lack of transparency and structure has increased the risk of market manipulation, investor losses, and even fraud.

This regulatory shift comes at a crucial time as well. Nepal was recently placed on the FATF grey list, which highlighted gaps in financial oversight, including investment sectors operating outside traditional regulation. So, the Nepal Government’s decision to designate SEBON as the regulator for bigger investment companies not under the regulatory framework is part of broader reforms aimed at addressing those concerns, improving transparency, and aligning with global standards to help Nepal regain financial credibility. And a step towards getting Nepal out of the FATF grey list. 

“I’m Not an Investment Company, Should I Care?”

That’s a fair question, but this new regulation impacts far more than just the companies directly involved.

Here’s how it affects everyday people:

1. It Makes Your Investments Safer

If you’ve invested in stocks, mutual funds, or put your money into any kind of structured product, these new rules mean the companies behind those investments are under tighter scrutiny.

That’s a win for everyone; fewer scams, fewer surprises, and more protection for your hard-earned money.

2. It Gives You Access to Better Information

Companies will now be required to disclose more about who they are, what they do, and how they’re performing. That means more informed decisions for you, the investor.

3. It Raises the Overall Market Standard

By pushing for better governance and accountability, SEBON is making Nepal’s entire investment landscape more mature and investor-friendly.

And when the market improves, so do your opportunities.

What Happens If Companies Don’t Comply?

This isn’t a soft suggestion. Companies that fail to register or meet the requirements could face:

• Legal action under the Money Laundering Prevention Act
• Fines and penalties
• Suspension from financial activities
• Loss of public credibility

In simple terms, it’s not worth ignoring. Non-compliant firms will find it harder to raise funds, attract investors, or operate at scale.

When Is the Deadline? 

One key aspect missing from the notice issued by SEBON is no mention of the timeline and deadline for investment companies to comply. This may be of significant concern as many investment companies may choose to wait for another notice clearly mentioning the deadline. We are not sure if this is a deliberate omission or lack of oversight on SEBON’s part. 

What About Smaller Investment Companies?

If you’re a smaller firm and you don’t yet meet the Rs 5 crore or Rs 10 crore threshold, you’re off the hook for now. But don’t get too comfortable.

This is likely the beginning of a more comprehensive regulatory shift. As the industry evolves, so will SEBON’s oversight. So if you plan to grow, start building good habits now, not later.

Get your paperwork in order, improve your governance practices, and operate with transparency. It’ll pay off in the long run.

Opportunities Hiding in Plain Sight

It’s easy to view this as just another layer of bureaucracy. But that’s not the whole story.

This regulation also opens new doors, for both companies and investors.

For businesses that embrace this shift, it’s an opportunity to:

• Build credibility
• Attract new investors
• Access better financing
• Compete on a global stage

For investors, it’s a sign that Nepal’s financial system is moving toward higher standards, and that’s a good thing for your future wealth and security.

Better regulation leads to better trust. And better trust leads to more investment.

A Step Toward a Stronger Future

SEBON’s notice isn’t a roadblock, it’s a roadmap. A cleaner, more transparent, and well-regulated capital market doesn’t just benefit a few players at the top. from startups to shareholders to everyday savers, It benefits the entire economy.

Yes, it will take time. Yes, there will be growing pains. But the result will be a financial system that’s stronger, safer, and far more stable than what we’ve had before.

Final Thoughts

Compliance might not be glamorous, but it’s absolutely essential for the long-term health of Nepal’s financial sector.

SEBON’s regulatory shift is a big step toward improving how investment companies operate. More importantly, it’s a signal to the public that Nepal is getting serious about financial integrity and investor protection. Whether you’re running a business or just planning where to put your savings, this matters.

Because stronger rules don’t just regulate businesses; they protect people, build trust, and help markets thrive.