SOCIAL STOCK EXCHANGE
WHY IN NEWS?
- Recently the National Stock Exchange of India received the final approval from the Securities and Exchange Board of India (SEBI) to set up a Social Stock Exchange (SSE).
WHAT IS SOCIAL STOCK EXCHANGE (SSE)?
- The SSE would function as a separate segment within the existing stock exchange.
- It will help social enterprises raise funds from the public through its mechanism.
- It would serve as a medium for enterprises to seek finance for their social initiatives.
- Retail investors can only invest in securities offered by for-profit social enterprises (SEs) under the Main Board.
- In all other cases, only institutional investors and non-institutional investors can invest in securities issued by SEs.
ELIGIBILITY CRITERIA OF SSE :
- Any non-profit organisation (NPO) or for-profit social enterprise (FPSEs) that establishes the primacy of social intent would be recognised as a social enterprise (SE), which will make it eligible to be registered or listed on the SSE.
- At least 67% of their activities must be directed towards attaining the stated objective.
WHO ARE NOT ELIGIBLE :
- Corporate foundations, political or religious organisations or activities, professional or trade associations, infrastructure and housing companies (except affordable housing) would not be identified as an SE.
HOW DO NON-PROFIT ORGANISATION (NPO) RAISE MONEY?
- NPOs can raise money through issuance of Zero Coupon Zero Principal (ZCZP) Instruments from private placement.
- They can also raise with the help of public issue, or donations from mutual funds.
- SEBI had earlier recognised that NPOs by their very nature have primacy of social impact and are non-revenue generating.
- Thus, there was a need to provide NPOs a direct access to securities market for raising funds.
- ZCZP bonds differ from conventional bonds in the sense that it entails zero coupon and no principal payment at maturity.
- It is mandatory that the NPO is registered with the SSE for facilitating the issuance.
- The instrument must have a specific tenure.
- It can only be issued for a specific project or activity that is to be completed within a specified duration.
HOW DO FOLLOW-ON PUBLIC OFFER (FPO) RAISE MONEY?
- For-Profit Enterprises (FPEs) need not register with social stock exchanges before it raises funds through SSE.
- However, it must comply with all provisions of the ICDR Regulations when raising through the SSE.
- It can raise money through issue of equity shares.
- Also by issuing equity shares to an Alternative Investment Fund including Social Impact Fund or issue of debt instruments.
DISCLOSURES TO BE MADE?
- SEBI’s regulations state that a social enterprise should submit an annual impact report in a prescribed format.
- The report must be audited by a social audit firm and has to be submitted within 90 days from the end of the financial year.
SYLLABUS : PRELIMS, GS-3, INDIAN ECONOMY