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Social Stock Exchange

  Mar 31, 2023

Social Stock Exchange

Q. Why is this in News?

A. National Stock Exchange of India received final approval from SEBI to set up the Social Stock Exchange (SSE).

Q. What is a Social Stock Exchange?

  • About:
    • The SSE would function as a separate segment within the existing stock exchange and 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, acquire visibility and provide increased transparency about fund mobilisation and utilisation.
    • 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:
    • Any non-profit organisation (NPO) or for-profit social enterprise (FPSEs) that establishes the primacy of social intent would be recognised as a SE, which will make it eligible to be registered or listed on the SSE.
    • 17 plausible criteria under SEBI’s ICDR Regulations, 2018 include serving to eradicate hunger, poverty, malnutrition, promoting education, employability, equality, and environmental sustainability among others
  • Ineligibility:
    • Corporate foundations, political or religious organisations, professional or trade associations, infrastructure and housing companies (except affordable housing) would not be identified as SE
    • NPOs would be deemed ineligible if dependent on corporates for more than 50% of its funding.
  • NPO Money Raising:
    • NPOs can raise money either through issuance of Zero Coupon Zero Principal (ZCZP) Instruments from private placement or public issue, or donations from mutual funds.
      • ZCZP bonds differ from conventional bonds in the sense that it entails zero coupon and no principal payment at maturity.
      • For ZCZP issuance, the minimum issue size is presently prescribed as Rs 1 crore and minimum application size for subscription at Rs 2 lakhs.
    • Also, Development Impact Bonds are available upon completion of a project and delivered on pre-agreed social metrics at pre-agreed costs/rates.
  • FPSE Money Raising:
    • FPEs need not register with SSE before raising funds through SSE.
    • It can raise money through issue of equity shares or issuing equity shares to an Alternative Investment Fund including Social Impact Fund or issue of debt instruments.