SEBI sets up a framework for the social stock market

Not-for-Profit Business Listing: SEBI Establishes Framework for Social Stock Exchange

New Delhi: Capital markets regulator SEBI on Monday released a detailed framework for the Social Exchange (SSE), specifying the minimum requirements for a non-profit organization (NPO) to register with the exchange and the disclosure requirements .

The regulator has specified the minimum requirements to be met by an NPO for registration with the SSE, the disclosure requirement for NPOs raising funds through the issuance of zero coupon zero principal instruments in its circular. SEBI has also put in place annual disclosure requirements that must be made by NPOs on these exchanges.

Requirements for NPOs

The minimum requirements to be met state that the NPO must be registered as a charitable trust and must be registered for at least three years, must have spent at least Rs 50 lakh per year in the past financial year and must have received funding of at least Rs 10 lakh in the last financial year.

Listed NPOs will be required to submit a statement of use of funds to SSE, as required by Sebi’s rules within 45 days of the end of the quarter.

Social enterprises raising funds using the SSE were also asked to publish an Annual Impact Report (AIR) within 90 days of the end of the financial year, capturing the qualitative and quantitative aspects of the social impact generated by them and, if applicable, the impact generated. by the project or solution for which funds have been raised on SSE.

According to the rules, SSE will be a separate segment from the existing exchanges.

The social enterprises that will be eligible to participate in the SSE will be entities – both NPOs and for-profit social enterprises – with social intent and impact as their primary objective. Further, such intent should be demonstrated by emphasizing qualifying social goals.

In addition, social enterprises will have to engage in one social activity among 16 major activities listed by the regulator. Eligible activities include the eradication of hunger, poverty, malnutrition and inequality; promote health care, support education, employability and livelihoods; empowerment of women and LGBTQIA+ communities for gender equality; and supporting social enterprise incubators.

NPOs must disclose financial statements for the past three years, details of past social impact and risks they see on their work and how they propose to mitigate them, SEBI said.

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Social enterprises not eligible

Ineligible social enterprise entities would be corporate foundations, political or religious organizations or activities, professional or trade associations, infrastructure and housing companies, except for affordable housing.

Meanwhile, the market regulator had notified rules in July allowing SSE to provide social enterprises with an additional means of raising funds. The idea of ​​the ESS was first floated by FM Nirmala Sitharaman in his budget speech for the fiscal year 2019-20.