Supreme Court Questions Insurance Authority, SEBON’s Regulatory Oversight

Kathmandu — The Supreme Court has raised serious concerns over the regulatory oversight exercised by the Nepal Insurance Authority and the Securities Board of Nepal (SEBON), stating that both institutions failed to discharge their statutory responsibilities in accordance with the law.

In its verdict, the Court held that the two regulators did not adequately protect investors’ interests while approving the issuance of shares at a premium, despite clear legal provisions governing such approvals.

The ruling specifically questioned the roles of both the Insurance Authority and SEBON in permitting insurers to issue shares above face value.

Referring to Section 45(5) of the Insurance Act, 2022, the Court noted that the law explicitly requires insurers inviting applications for public shares to issue them at face value, regardless of any conflicting provisions in other laws.

The Court further held that the Insurance Act is a special law and therefore prevails over general provisions contained in the Companies Act or securities regulations. It concluded that allowing premium-priced share issuances despite this explicit provision was inconsistent with the law.

“The issuance and sale of shares to the public at a premium in violation of the law undermines investor confidence in the securities market and weakens institutional governance,” the judgment states.

The Court ultimately concluded that both the Nepal Insurance Authority and SEBON, despite their legal obligation to safeguard investors’ interests, failed to fulfill their regulatory duties in compliance with the law.