The Securities and Exchange Board of India has proposed compliance standards for index provider...
Based on recommendations of the working group and technical committee, the SEBI issued a comprehensive framework for Social Stock Exchange on 19th September 2022. It provides a detailed framework for registration of Social Stock Exchanges. The detailed guidelines aim to provide social enterprises and voluntary organisations an option to raise capital in the form of equity, units of a mutual fund and debt. This framework also seeks to provide an organised and transparent channel for social enterprises to raise funds from stock exchanges.
Thesocial enterprises that are working for the objective of social welfare will be considered for participation in Social Stock Exchange, including:
A not-for-profit organisation that wants to register itself as Social Stock Exchange shall fulfil the following:
The entities shall be registered as NPO, and their registration certificate shall be valid for a minimum of 12 months from the filing date on Social Stock Exchange. It is also mandatory that the registration certificate of the NPO shall be held for a minimum of 3 years. The entities who can apply for SSE are:
The NPO shall disclose whether it is under government or private control before filing for registration as Social Stock Exchange.
The NPO shall possess registration certificate issued under Section12A, 12AA, 12AB. It is also required that the registration certificate shall be valid for the next 12 months, and the entity should not have any scrutiny by Income Tax. Moreover, the NPO shall hold a Valid IT pan.
The NPO shall hold a valid registration issued under Section 80G of the Income Tax act, 1961. The NPO shall also ensure whether tax deduction is available to investors or not.
The entity shall meet all the requirements of regulation 292E of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
The entity to be eligible for registration as Social Stock Exchange shall have minimum transactions.
The NPOs registered as Social Stock Exchange and are raising funds throughthe issuance of Zero coupons, Zero Principal Instruments shall need to make a final fundraising document. And it shall be posted on the SSE website.The documents shall contain the following:
The organisational activities and programmes are subject to the aims and objectives of the MOA and AOA of the organisation.
The NPO shall mention the targeted segment. It should also provide the process to approach the targeted segment and how they will fulfil this objective. The NPO shall also disclose the method in which they approach their customers.
The NPO shall frame a strategy that defines its strategy toward fulfilling the challenges and the method of learning from these challenges.
The NPO shall disclose the details about its organisation body, including compositions, Number of Board meetings, the total number of members etc.
The NPO shall disclose the Key managerial person involved in fundraising, Marketing, communication, HR, and Finance.
The NPO shall disclose its registered and operational address in the document.
The NPO shall disclose the last 3 years of financial statements in the document, and an auditor shall audit it. It shall be made available at the request of the authority or any person.
The NPO shall include the following documents:
The NPO shall disclose the process for mitigation of risk that:
The NPO shall have to make annual disclosures within 60 days from the end of every financial year. The disclosures shall be of the following:
The social enterprises that have registered or raised funds through the Social Stock exchange have to make the following disclosures:
The Annual Impact Report shall contain the following aspects:
1.Environmental or social Challenge that the organisation wish to address: The organisation shall enlist in detail the challenges, cause and consequences that the organisation is trying to resolve.
2. Method of addressing the organisational challenges: The organisation shall enlist in detail the change that the organisation wants for the targeted segments.
3. Targeted Segment: The organisation shall disclosethe targeted groups.
4. Positive and Negative outcomes of the activities, programs, interventions and projects: The organisation shall disclose the inputs employed for the proposed solution.
1. Context Description at the start of activities, programs, interventions and projects and result at the end of activities, programs, interventions and projects:The organisation shall establish the baseline for activities, programs, interventions and projects. It is established to ascertain the deviation that takes place at the end of the activity.
2. Trend of Past performances: The Organisation shall disclose the past performance trends so that the inference can be adjudged for the present activities, programs, interventions and projects.
3. Measure for the sustainability of activities, programs, interventions and projects: The organisation shall disclose the detailed implementation plan for the sustainability of activities, programs, interventions and projects
4. Alignment of solutions to sustainable development goals.
5.Approach to Feedback of the Stakeholders: The organisation shall disclose the manner of implementing the shareholders’ feedback and how they mapped and prioritised the feedback from key shareholders.
1. Includes a report of impact on the targeted segment: It will include activity reach, program, intervention, level of impact generated etc.
2. Metrics Monitoring:
Any listed Non-Profit Organisation shall submit the statement of utilising funds to the Social Stock Exchange within 45 days from the end of the quarter.
The Social Stock Exchange provides an option for the Non-profit organisation to raise capital through equity, units of a mutual fund and bonds. It also acts as an alternative source of income for social enterprises so that they can fulfil their social objectives. The social enterprises can raise funds through Zero Coupon Zero Principal bonds, Mutual funds, Social Venture Funds and Equity Listing.The changes are bought, keeping in view the downfall of the economy after the pandemic. The move to include the social enterprises fulfils the objective of including all the entities under the scrutiny of SEBI.