Kathmandu, Feb. 11 -- A regulatory dispute over how to classify company shares has frozen Nepal's stock market expansion and threatens to lock up billions of rupees of promoter capital, revealing deep fractures in the country's efforts to build a modern securities system.

At the heart of the controversy is whether promoter shares and public shares of listed companies should be assigned separate International Securities Identification Numbers (ISINs), the unique codes used globally to track securities. Nepal's Central Depository Services (CDSC) has proposed requiring dual ISINs across all sectors, a system that critics say exists nowhere else in the world and would effectively create permanent restrictions on promoter capital.

The Securi...