Creation of Social Stock Exchange to be covered under Regulatory ambit of SEBI for Fund Raising by Social Enterprises: SEBI

The Securities and Exchange Board of India (SEBI) met in Mumbai on Tuesday under the Chairmanship of Mr.Ajay Tyagi. The Part-Time Members joined the meeting through video conferencing. The Board, inter-alia decided to include the creation of the Social Stock Exchange (SSE) under the regulatory ambit of SEBI for fund raising by social enterprises (SE).

The framework for the SSE has been developed on the basis of the recommendations of a working group and a technical group constituted by SEBI.

Social Enterprises eligible to participate in SSE, shall be entities (Non- Profit Organization – NPO and For-Profit Social Enterprise – FPE) having social intent and impact as their primary goals. Social Enterprises will have to engage in a social activity out of the list of 15 broad eligible social activities approved by the Board.

Eligible NPOs may raise funds through equity, Zero Coupon Zero Principal (ZCZP) bonds, Mutual Funds, Social Impact Funds, and Development Impact Bonds. NPOs desirous of raising funds on SSE shall be required to be registered with SSE.

Social Venture Funds under SEBI (Alternative Investment Funds) Regulations will be rechristened as Social Impact Funds (SIFs). The corpus requirements for such funds shall be reduced from Rs. 20 crores. to Rs. 5 crores. Further, the reference to “muted returns” shall be removed.

SEBI shall make suitable amendments to its regulatory framework, towards mandating initial and continuous disclosures for Social Enterprises, covering aspects relating to governance, financial and social impact.

Further, Audit of social impact, i.e. social audit shall be mandated for SEs raising funds/ registered on SSE. To begin with, only reputed firms/institutions having expertise in the area of social audit shall be allowed to carry out social audits employing social auditors who have qualified the certification course conducted by NISM. A separate sustainability directorate under ICAI shall function as an SRO for Social Auditors.

SEBI shall engage with NABARD, SIDBI and stock exchanges towards institution of a capacity building fund, with a corpus of Rs 100 Crores.

Operationalization of the framework will require amendments to applicable regulations such as ICDR Regulations, LODR Regulations, AIF Regulations, Mutual Fund Regulations etc. which will be taken up by SEBI.

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