Framework on Social Stock Exchange (“SSE”)

SEBI/HO/CFD/PoD-1/P/CIR/2023/196                                                           

[1]SEBI has introduced the framework for the Social Stock Exchange (SSE) through a circular dated December 28, 2023. This follows a previous circular, SEBI/HO/CFD/PoD-1/P/CIR/2022/120, issued on September 19, 2023, which outlined the detailed framework for SSE. After incorporating public consultation feedback, SEBI approved amendments to the SEBI (ICDR) Regulations, 2018, and the SEBI (LODR) Regulations, 2015. These amendments were officially notified by SEBI on December 21, 2023.

Under the new regulations, SSE will function as a separate division within existing stock exchanges, facilitating both Not-for-Profit Organizations (NPOs) and for-Profit Social Entities to raise funds for initiatives aimed at social good and positive change.

The circular sets forth prerequisites for NPOs intending to participate in SSE. This includes the requirement for a Registration Certificate under sections 12A/12AA/12AB/10(23C)/10(46) of the Income-tax Act, 1961, and a valid 80G registration under the Income Tax Act, 1961, for entities registered under sections 12A/12AA/12AB of the Income-tax Act, 1961.

Additionally, modifications have been made to the disclosure requirements regarding the social impact of NPOs. The new circular emphasizes highlighting trends in key metrics/parameters relevant to the NPO seeking funds on SSE, including the number of beneficiaries, cost per beneficiary, and administrative overheads.

The circular introduces several other modifications to the September Circular. It outlines the procedure for the public issuance of Zero Coupon Zero Principal Instruments by NPOs. Moreover, it specifies the contents to be included in the Fundraising Document and details other conditions related to the issuance of Zero Coupon Zero Principal instruments.

[1] https://www.sebi.gov.in/legal/circulars/dec-2023/framework-on-social-stock-exchange_80233.html