Social Stock Exchanges
Source : Business Standard
GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Why in News ?
Sebi’s technical group (TG) on social stock exchanges (SSEs) has recommended that corporate foundations, political and religious organisations should be made ineligible to raise funds using the SSE mechanism.
About Social Stock Exchanges
- Enables Indian social enterprises to list their securities or other financial instruments, providing them with an avenue for raising capital for their operations and growth, and reducing their dependency on adhoc funding like grants or donations.
- Proposal to set up SSEs in the country was first floated during the Union Budget in 2019.
- SEBI Constituted a working group.
- In September 2020 Sebi set up the Technical Group for further expert advice and clarity was needed on the WG’s recommendation.
- The regulator has invited public feedback on the report by June 20 following which it will firm up rules around setting up of SSEs.
- This would operate as a separate segment under existing Indian stock exchanges.
- Enabling socially minded investors to diversify their investment portfolio and developing a strong social securities market in the country.
Key Facts
- The report on SSEs prepared by the expert panel
- Corporate foundations, political or religious organisations and activities, professional or trade associations, infrastructure and housing companies (except affordable housing) will not be permitted on SSE.
- At the same time both for profit (FP) and not for profit organisations (NPO) should be allowed to tap the SSE.
- Condition is that they are able to demonstrate that social intent and impact.
- Panel suggested three parameters to establish primacy of social impact objective.
- Conditions for FP and NPO
- The panel has recommended different instruments of fund raising for NPOs and FPOs.
- Modes available for fundraising for NPOs shall be equity, zero coupon zero principal bond (ZCZP), development impact bonds, social impact fund, currently known as social venture fund (SVP) with 100 per cent grants-in grants out provision, and donations by investors through mutual funds.
- Modes available for FP enterprises will be equity, debt, development impact bonds, and social venture funds.
- FPEs that wish to list their equity or debt will first have to demonstrate their track record through social performance.
- For SVP
- Recommended that the minimum corpus size for such funds be reduced from Rs 20 crore to Rs 5 crore
- The minimum subscription amount be reduced from Rs 1 crore to Rs. 2 lakh.
- The SVP will fall under category-I Alternative Investment Fund (AIF) and will allow 100 per cent grants-in and grants-out.
- The capacity building fund for SSE should have a corpus of Rs 100 crore.
- This fund should be housed under Nabard.
- Exchanges and other developmental agencies such as SIDBI should be asked to contribute towards this fund.
- Entities on SSE shall disclose social impact (for NPOs and FPEs) report on annual basis covering aspects such as strategic intent and planning, approach, impact score card.
Securities and Exchange Board of India
- The regulatory body for securities and commodity market in India.
- A non-statutory body for regulating the securities market.
- The jurisdiction of Ministry of Finance, Government of India.
- Basic functions is to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto.
- The SEBI Borad
- The chairman is nominated by the Union Government of India.
- Two members, i.e., Officers from the Union Finance Ministry.
- One member from the Reserve Bank of India.
- The remaining five members are nominated by the Union Government of India, out of them at least three shall be whole-time members.
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