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?
- 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.
- 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
- 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.