SEBI gives final nod for Social Stock Exchange: What is SSE? Who can list on it?

On December 19, the National Stock Exchange of India (NSE India) received an in-principle approval from the Securities Exchange Board of India (Sebi) to set-up SSE as a separate segment.

In July, the regulator notified rules for Social Stock Exchange (SSE) to provide social enterprises with an additional avenue to raise funds. The framework was created based on the suggestions of a working group and technical group that the regulator formed.

Sebi gave its in-principle approval for an SSE to the Bombay Stock Exchange (BSE) in October.

What is SSE?

SSE is a novel idea in India, and a stock exchange of this kind is intended to benefit the private and non-profit sectors by directing more capital to them.

During her Budget speech for the fiscal year 2019–20, Finance Minister Nirmala Sitharaman first proposed the concept of SSE. The Securities Contracts (Regulation) Act, 1956 was then invoked by the government, which subsequently published a gazette notification announcing a new security as “zero coupon zero principal”.

The SSE will function as a distinct division of the current stock exchanges under the new regulations.

Also read: Why NSE’s Social Stock Exchange is just what India needs

Who can list on SSE?

The SSE will be a distinct division of the current stock exchanges under the new regulations. Not-for-profit organisations (NPOs) and for-profit social enterprises with social intent and impact as their primary goal will be eligible to participate in the SSE.

Additionally, such an intent should be shown by its emphasis on social goals that are appropriate for under-served or less privileged populations or areas.

The social enterprises will have to engage in a social activity out of 16 broad activities listed by the regulator.

The eligible activities include-

– eradicating hunger poverty, malnutrition and inequality

– promoting healthcare, supporting education, employability and livelihoods

– gender equality empowerment of women and LGBTQIA communities

– supporting incubators of social enterprise.

Corporate foundations, political or religious organisations or activities, professional or trade associations, infrastructure companies, and housing companies, with the exception of affordable housing, will not be eligible to be identified as social enterprises.

According to Sebi’s framework, minimum issue size of ₹1 crore and a minimum application size for subscription of ₹2 lakh are currently required for SSE.

Minimum Requirements

In September, the market regulator has specified minimum requirements to be met by an NPO for registration with SSE, disclosure requirement for NPOs raising funds through the issuance of zero-coupon zero principal instruments and put in place annual disclosure requirements that needs to be made by NPOs on such exchanges.

With regard to minimum requirements to be met by a NPO, Sebi said that NPO needs to be registered as a charitable trust and should be registered for at least three years, must have spent at least ₹50 lakh annually in the past financial year and should have received a funding of at least ₹10 lakh in the past financial year.