OTC bylaws

Over-the-counter (OTC) is the process of trading securities of companies that are not listed on a formal exchange such as the Nepal Stock Exchange (NEPSE). Securities that are traded over-the-counter are traded via a broker-dealer network as opposed to on a centralized exchange. These securities do not meet the requirements to have a listing on a standard market exchange.

Procedure to register OTC market

The Stock Exchange may operate an over-the-counter market for facilitating the purchase, sale or exchange of unlisted or listed securities. To operate the market,

1st step  to fulfill  documents that the Stock Exchange asked to enclose the information regarding the trading procedures and provisions and submit an application to the Board for obtaining the approval.

If the application is as per prescribed by OTC bylaws and hold the documents that are demanded by board then there will be an examination on the application received by board and if it is considered reasonable, the Board may grant its approval.

After the approval from board, the stock exchange market can give order to purchase and sell of securities. Without the approval the stocks can't be sell and purchase. While selling and purchasing of securities, every seller and buyer have to pay certain amount that is determined by Schedule 4 of OTC Bylaws

Securities Trading procedure

1. The seller of securities will have to submit the sale order for the sale of the company that the seller wants to sell, along with the required documents after verifying or signing the sale order and signature from the concerned company.
2. Received sales orders will be registered by the stock market.
3. The buyer of the securities will have to register with the securities purchase order of the company that they want to purchase.
4. The securities market may require the buyer to submit the number of securities mentioned in the purchase order filled by the securities buyer and ten percent of the value of the securities to be purchased as required.
5. The name of the company and the number of securities mentioned in the purchase and sale order received are mentioned on the price coating board for the information of the investors. The stock market will have to increase or decrease the price based on the order received.
6. Securities Trading can be done, if the price and number are matched as per required procedure.

Securities Trading not to be done in OTC market

1. Securities withheld from the Government of Nepal or the concerned bodies of the Government of Nepal.
2. Securities withheld by banks and financial institutions
3. Securities withheld from related companies
4. Securities withheld by Nepal Securities Board and Stock Market
5. Securities listed on the stock market

Things not to be done by the seller and buyer of securities

1. Spreading rumors to cover up the real situation of a company and sell its securities at a higher price.
2. Tempting the investors.
3. Creating artificial market.
4. To act against the interest of the investors.
5. Unnecessary reduction and increase of price through circular trading.

Business clearing process

The seller has to submit the deed filed as per schedule 7 for clearing and transfer of name, written in accordance with schedule 8 and the certificate of securities issued by the seller to the specified partner within three days. The amount should be paid by the buyer for the securities purchased; name transfer fee etc. should be deposited in the specified bank within three days and submitted to the specified branch. Documents received from the seller should be signed by the buyer and sent to the concerned company or designated institution for registration.

Obligations that need to be fulfill by companies

1. Any decision or action that affects the price should be made available to the stock market immediately.
2. If there are changes in the company's annual report or financial statements, the stock market must be notified immediately.
3. The company has to submit quarterly details to the stock market within 30 days
4. Certificates of securities issued by the OTC market for repossession should be rejected and returned by the company as soon as possible.
5. If an investor wants to consolidate or split the securities he has invested, the company will have to consolidate or split the certificate of securities based on his request.

Disclaimer: This writing is prepared to share general information only and for legal purpose, advice of legal professions is must. 

Related Professional:

• ADVOCATE AJAYA SHRESTHA
• ADVOCATE PRABIN SHRESTHA

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