SEBON Investigates Possible Insider Trading of KDBL Shares
The Securities Board of Nepal (SEBON) is currently looking into possible ‘insider trading’ related to share transactions of the troubled Karnali Development Bank Limited (KDBL). This investigation comes after the Nepal Rastra Bank (NRB) recently declared KDBL as problematic due to its failure to meet the required capital adequacy ratio. In response, the central bank imposed corrective measures on KDBL, directing the bank to stop collecting deposits and issuing loans.
Despite this announcement, KDBL’s share price experienced a significant increase during the following stock trading day, leading regulators to implement a positive circuit breaker on the trading of KDBL shares. The unusual rise in share price, despite the bank’s financial troubles, raised concerns about potential insider trading.
Niranjaya Ghimire, spokesperson for SEBON, confirmed that an investigation has been launched into KDBL’s share transactions. Ghimire noted that the swift surge in share price following the bank’s problematic status declaration was concerning and prompted regulatory action. SEBON has reached out to the Nepal Stock Exchange (NEPSE) for details on KDBL’s share trading and will take appropriate measures based on the findings.
Insider trading involves the unauthorized disclosure of sensitive stock market information for personal gain. A previous study by the Ministry of Finance highlighted the prevalence of insider trading and other market anomalies in Nepal’s stock exchange. Meanwhile, NRB’s inspection of KDBL revealed significant credit management deficiencies and a high non-performing loan ratio of 40.85%.
To address these issues and protect depositors and the public, NRB has invoked the “Prompt Corrective Action Regulations, 2017.” This directive gives KDBL a six-month grace period to improve its financial situation, during which the bank is restricted from accepting new deposits, opening accounts, or issuing loans. SEBON and other regulatory bodies are closely monitoring the situation to ensure market integrity and investor protection.
