Santosh Narayan Shrestha, Chairman of the Securities Board of Nepal (SEBON), came under intense questioning during a meeting of the parliamentary Finance Committee on Thursday. Lawmakers sharply criticized his leadership over issues related to the long-delayed restructuring of the Nepal Stock Exchange (NEPSE) and the controversial licensing of a new stock exchange.

Shrestha was accused of acting under the influence of vested interest groups, lacking transparency, attempting to benefit a company he has ties to by approving its IPO, and rushing to approve new licenses allegedly under pressure from middlemen.

Dr. Swarnim Wagle, Deputy Chair of the Rastriya Swatantra Party (RSP) and a key member of the committee, issued a strong warning: if his party comes to power after the 2027 general elections, it will revoke any questionable decisions made regarding new stock exchange licenses. Wagle criticized the process by which the Finance Committee previously recommended licensing a second exchange on November 10, 2023, stating that he had filed a note of dissent at the time.

“This is like slaughtering a milking cow to feed corrupt interest groups,” Wagle said, expressing fears that private exchanges could undermine NEPSE, which is majority-owned by the government. Three private firms, Himalayan Stock Exchange, National Stock Exchange, and Annapurna Stock Exchange, have applied for licenses.

Lawmakers also questioned Shrestha about SEBON's approval of an IPO for Bungad Hydropower, in which he and his family allegedly have a stake, while many other hydropower IPOs remain pending. Former Finance Minister and Maoist Center MP Barsaman Pun accused Shrestha of acting like a player in the very market he is supposed to regulate.

Nepali Congress MP and former Finance Minister Dr. Prakash Sharan Mahat echoed concerns, warning against turning the securities market into a political battleground. He called on the SEBON chair to clarify his stance on whether the government should retain control of NEPSE or whether private exchanges should be allowed, and how many such entities are necessary.

Unified Socialist Party MP Metmani Chaudhary also criticized Shrestha, questioning why companies linked to him were given IPO approvals while others were held back.

Lawmakers highlighted the gravity of the issue, pointing to NEPSE’s market capitalization of Rs 4.6 trillion, and warned that granting a new exchange license without restructuring NEPSE could erode government investment.

Chairman Shrestha Responds: Licensing Process will Proceed

In his response, SEBON Chairman Shrestha defended the decision to proceed with licensing a new stock exchange. He cited multiple government-commissioned reports, including one led by former Deputy Governor Chintamani Shivakoti, all of which recommended the establishment of an additional exchange. Legal hurdles that had previously stalled the process have now been cleared, he said.

“The licensing process is being carried out under government directives based on expert studies. I am clear on that,” Shrestha stated. He also noted that decisions are not made unilaterally but through board consensus, asserting that transparency has been maintained.

Regarding IPO approvals, Shrestha explained that SEBON prioritized companies that had fulfilled all regulatory requirements, while others requiring further review remain pending.

However, he acknowledged confusion created by conflicting directives from two key parliamentary committees: the Finance Committee and the Public Accounts Committee. The latter had previously instructed SEBON to halt IPOs for companies with a net worth below Rs 90 per share or those issuing shares at a premium. Although Shrestha was not chair at the time of that directive, SEBON’s board had implemented it.

Recently, the Finance Committee directed SEBON to proceed in accordance with existing laws. Shrestha said this created ambiguity that SEBON is now working to clarify, and that he has briefed both committees accordingly.

He further denied accusations of misconduct and stated he would resign immediately if any wrongdoing is proven.

Meanwhile, NEPSE CEO Chudamani Chapagain told the committee that the exchange’s restructuring file has already been submitted to the Finance Ministry but remains stalled due to lack of ministerial action.