SEBI nod for creation of Social Stock Exchange for fund raising by Social Enterprises

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Mumbai : The SEBI Board on Tuesday approved 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.

As per the framework approved by the SEBI Board, SSE shall be a separate segment of the existing stock exchanges. 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 crs. to Rs. 5 crs. 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. 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   above   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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