Framework for Social Stock Exchange – SEBI

Framework for social stock exchange – SEBI

Recently the Securities and Exchange Board of India (SEBI) has prepared a framework for Social Stock Exchange (SSE).

Prior to this framework, SEBI had notified certain rules for SSEs. These rules were issued to provide additional options to social enterprises (SEs) to raise funds.

Under these rules, non-profit organizations (NPOs) and social enterprises were considered eligible to participate in SSE, whose primary goal was social work and benefit to the society.

Under this, 16 wide-ranging social activities have been allowed. These include eradication of hunger, poverty and malnutrition; LGBTQIA+ related issues etc.

SSE is a new concept. The Finance Minister had mentioned this for the first time in the budget speech of the financial year 2019-20. It aims to help private and non-profit organizations raise more capital.

Glimpse of the latest framework designed for SSE:

  • NPOs must be registered as a charitable organization. The registration certificate must be mandatorily valid for the next 12 months.
  • The NPO should be at least three years old.
  • Social enterprises raising funds through SSE will have to submit ‘Annual Impact Report’. This report has to be submitted within 90 days of the end of each financial year.
  • NPOs raising funds through ‘Zero Coupon Zero Principal Instruments’ have to state their vision, target community etc.

Zero Coupon Zero Principal Instruments (ZCZPI)

  • Usually, when an institution issues a bond (a type of debt security), it has to pay interest and principal only when the bond matures.
  • However, ZCZPI is classified as a ‘charity’ rather than a loan.
  • Therefore, the borrowing institution neither has to pay interest (zero coupon), nor pay the principal amount (zero principal).

Source – The Hindu

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