Sebi comes out with framework for social stock exchange

New Framework for Social Stock Exchange: The Securities and Exchange Board of India (SEBI) has come out with a detailed framework for Social Stock Exchange (SSE).

  • This came after the SEBI, in July, notified rules for SSE to provide social enterprises with an additional avenue to raise funds.

Key Points of the new framework of SSE:

  • Under the new rules, the Social Stock Exchange (SSE) will be a separate segment from existing stock exchanges.
  • Social enterprises that are eligible to take part in the SSE must be for-profit and not-for-profit social enterprises having social intent and impact as their primary goal.
  • These social enterprises will have to engage in a social activity out of 16 broad activities listed by the regulator.
  • The eligible activities include eradicating poverty, hunger, malnutrition and inequality; promoting healthcare, supporting education, employability and livelihoods; gender equality empowerment of women and LGBTQIA+ communities; and supporting incubators of social enterprise.

Note: Corporate foundations, political or religious organizations or activities, professional or trade associations, infrastructure and housing companies, except affordable housing, will not be eligible to be identified as a social enterprise.

  • The new framework specifies the minimum requirements of the not-for-profit organizations (NPOs) for registering with the bourse as well as the disclosure requirements.
  • The NPOs are required to disclose funds raised through the issuance of zero-coupon zero-principal instruments.
  • The Listed NPOs are mandated to submit a statement of utilization of funds to the SSE within 45 days from the end of quarter.
  • Social enterprises raising funds using SSEs are also required to provide Annual Impact Report within 90 days from the end of financial year.
  • This report must highlight the qualitative and quantitative aspects of the social impact created by the NPOs and if possible, it must also capture the impact generated by the project or solutions for which funds were raised on SSE.

What is SSE?

  • Social Stock Exchange (SSE) is a novel concept in India and such a bourse is meant to serve the private and non-profit sectors by channeling greater capital to them.
  • It is the public listing of Not for Profit Organization (NPO) on stock exchanges.
  • The idea of SSE was first floated by Finance Minister
  • Nirmala Sitharaman in her Budget speech for the financial year 2019-20.
  • The NPOs are establishments involved in the welfare of society or community.
  • They are set up as charitable organizations.
  • The SSE aims to provide them with alternative fund-raising instrument.
  • The investors can claim tax benefits for making contributions via the SSE.

 Similar mechanism is available in countries like Canada, the United Kingdom and Brazil.