Market regulator Sebi approves framework for social fair

Market regulator Sebi on Tuesday decided on a framework for the social exchange for fundraising by social enterprises.

The Social Scholarship (SSE) framework has been developed based on the recommendations of a working group and technical group composed by the regulator.

After Tuesday’s board meeting, Sebi chairman Ajay Tyagi said that SSE will be a separate segment from the existing exchanges.

Social enterprises (SEs) eligible to participate in the SSE must be entities — non-profit organizations (NPOs) and for-profit social enterprises — with social intent and impact as their primary purpose.

Such intention should also be demonstrated by the focus on eligible social objectives for the disadvantaged or disadvantaged populations or regions.

The social enterprises will have to carry out a social activity from the list of 15 broad activities approved by Sebi.

When asked about the timeline for the SSE, Tyagi said he cannot specify the timeline for the exchange and will coordinate with the government to move it forward.

With regard to fundraising, Sebi said eligible NPOs can raise funds through equities, zero coupon zero principal bonds, mutual funds, social impact funds and development impact bonds.

NPOs wishing to raise money on the SSE must register with the exchange.

The regulator said social venture capital funds will be rebranded as social impact funds under Sebi’s Alternative Investment Funds standards. Also, the corpus requirements for such funds will be reduced from Rs 20 crore to Rs 5 crore. Furthermore, the reference to “muted returns” is removed.

Sebi said it will make appropriate changes to its regulatory framework, towards mandating initial and ongoing disclosures for social enterprises, with regard to governance, financial and social impact aspects.

It further said that social audit will be made mandatory for SEs raising funds or registered on SSE. For starters, only reputable companies/institutions with social audit expertise are allowed to conduct social audits using social auditors who have qualified NISM’s certification course.

Furthermore, a separate sustainability directorate under ICAI will act as an SRO for social auditors.

The regulator said it will work with NABARD, SIDBI and exchanges to establish a capacity building fund, with a corpus of Rs 100 crore.

In order to operationalize the framework, several standards have to be adapted and these will be adopted by Sebi, according to the regulator.

In May, a Sebi panel suggested that corporate foundations, political and religious organizations, among others, should not be members of the SSE.

The social stock exchange is a new concept in India and such exchange aims to serve private and non-profit sector providers by channeling more capital to them.

The idea of ​​SSE was first floated by Finance Minister Nirmala Sitharaman in her 2019-20 budget speech.

(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content was automatically generated from a syndicated feed.)

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