SEBI gives final nod for Social Stock Exchange

SEBI: Securities Exchange Board of India on 27 December 2022, granted final approval for introducing Social Stock Exchange (SSE) as a separate segment on BSE.

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. The idea of SSE was first proposed by Finance Minister Nirmala Sitharaman in her Budget speech for the financial year 2019-20.

The Securities Contracts (Regulation) Act, 1956 was then invoked by the government, which subsequently published a gazette notification announcing a new security as “zero coupon zero principal”.

The SSE will function as a distinct division of the current stock exchanges under the new regulations.

Rules and Regulations for SSE

Not-for-profit organizations (NPOs) and for-profit social enterprises with social intent and impact as their primary goal will be eligible to participate in the SSE.

The social enterprises will have to engage in a social activity out of 16 broad activities listed by the regulator.

The market regulator has specified minimum requirements to be met by an NPO for registration with SSE, disclosure requirement for NPOs raising funds through the issuance of zero-coupon zero principal instruments and put in place annual disclosure requirements that needs to be made by NPOs on such exchanges.

With regard to minimum requirements to be met by a NPO, SEBI said that NPO needs to be registered as a charitable trust and should be registered for at least three years, must have spent at least Rs50 lakh annually in the past financial year and should have received a funding of at least Rs10 lakh in the past financial year.

The eligible activities include: eradicating hunger poverty, malnutrition and inequality, promoting healthcare, supporting education, employability and livelihoods, gender equality empowerment of women and LGBTQIA communities, supporting incubators of social enterprise.

Corporate foundations, political or religious organizations or activities, professional or trade associations, infrastructure companies, and housing companies, with the exception of affordable housing, will not be eligible to be identified as social enterprises.

The minimum issue size of Rs 1 crore and a minimum application size for subscription of Rs 2 lakh are currently required for SSE, according to SEBI’s framework.

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