Sebi board clears framework for Social Stock Exchanges: Key things to know

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Markets regulator Securities and Exchange Board of India (Sebi) on September 28 approved many reforms, including frameworks for social stock exchanges. Sebi chief Ajay Tyagi said in a press conference a proposal has been cleared for the creation of this exchange for fundraising by social enterprises. The market regulator has also approved framework for spot trading of gold. It has proposed that instruments representing gold called Electronic Gold Receipts be notified as securities.

However, he further said that he cannot specify the timeline for such exchange, and will coordinate with the government to take it ahead.

Here’s all you need to know about it:

What is Social Stock Exchange?

An SSE allows the listing of non-profit or non-government organisations on stock exchanges, providing them with an alternative fund-raising structure. It may be listed on BSE or the National Stock Exchange. Countries like Canada, UK and Brazil have SSEs.

Size of the market

According to Sebi, India has at least 31 lakh NPOs, more than double the number of schools and 250 times the number of government hospitals, amounting to about one NPO for every 400 Indians.

Objectives

According to the draft report, SSE will unlock large pools of social capital, and encourage blended finance structures so that conventional capital can partner with social capital to address the urgent challenges of Covid-19.

How will it work?

The Social Stock Exchange (SSE) shall be a separate segment under the existing stock exchanges. This means that the SSE is not only a place where securities or other funding structures are “listed” but also a set of procedures that act as a filter, selecting in only those entities that are creating measurable social impact and reporting such impact.

Tax benefits

The draft report last year said that the SSE could invite corporates and philanthropic foundations to contribute, with the understanding that corporate contributions would be CSR eligible and philanthropic donations would benefit from the same regulations and fiscal benefits as are available under 80G, etc.