Social Stock Exchange (SSE), Meaning, Framework, and Role of Company Secretaries

Social Stock Exchange: The concept of the Social Stock Exchange(SSE) was introduced by the Hon’ble Finance Minister during the Union Budget of 2019-20. The goal was to create a platform where social enterprises could raise funds from the public. This initiative would operate under the oversight of SEBI, providing support to both non-profit and for-profit social organisations.

What is a Social Stock Exchange?

A Social Stock Exchange provides a marketplace where social enterprises can openly list themselves to attract funding. These enterprises focus on making a positive impact in areas like health care, education, and environmental sustainability. Through the SSE, they can tap a variety of financing instruments, including impact bonds and dedicated funds, to broaden their capital base and scale their mission-driven work.

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Why is Social Stock Exchange Important?

Many Social Enterprises struggle to secure sufficient funding to operate their activities.

Banks and typical investors frequently fail to grasp their objectives. A Social Stock Exchange helps these businesses in linking up with investors aiming to create a positive impact. It additionally builds trust and establishes clear guidelines.

SEBI Guidelines for SSE

SEBI has shared detailed guidelines on how the Social Stock Exchange will work. A working group and then a technical team were made to prepare reports. Based on these guidelines, SEBI has allowed:

1. Listing of non-profits through zero-coupon zero-principal bonds

2. For-profit social enterprises can raise money using equity shares

3. Minimum standards for reporting the impact of their work.

4. Creating a fund to support smaller non-profit organizations in reporting and training.

Structure of Social Stock Exchange in India

SEBI has suggested that the Social Stock Exchange could operate as a segment of major stock exchanges such as BSE or NSE. In this manner, it can utilize current systems and connect with additional individuals. 

A registration procedure will be established for Non-Profit Organizations (NPOs) and For-Profit Enterprises(FPEs). These companies must demonstrate that they strive to generate a social impact.

Social Enterprises Listing in India

To list on the Social Stock Exchange, social enterprises must show they are working for a social cause. They must share their past work, future plans, and how they will use the money raised. They must also report each year on the impact of their work.

SEBI wants a standard way of reporting. Both NPOs and FPEs must follow this to remain listed

Tools to Raise Money on SSE

• For NPOs: They can use tools like Zero Coupon Zero Principal Bonds, Social Impact Funds, and Mutual Funds.

• For FPEs: They can use Equity Shares, Debt Instruments, and Development Impact Bonds.

How does SSE help India?

India has numerous requirements in sectors such as education, healthcare, and agriculture. The government by itself cannot address every issue. The Social Stock Exchange facilitates the allocation of private funds to address societal challenges. It assists small organizations in expanding and connecting with a broader audience.

Annual Impact Report

All listed organizations on the SSE must prepare a report every year. This report will explain:

• What problem they are trying to solve

• How are they solving it?

• Who is getting help?

• What has the result been?

Role of Company Secretary in Social Stock Exchange

A Company Secretary(CS) plays a big role in making sure that listed social enterprises follow the rules. Their role includes:

• Helping social enterprises register on the Social Stock Exchange.

• Ensuring proper reporting of social impact and finances.

• Advising on fundraising tools like bonds and funds

• Supporting in governance and compliance work.

Training and Capacity Building

SEBI has suggested creating a special fund to train smaller NPOs. This fund will be managed by NABARD. It will help them understand how to register and raise money using the SSE.

Social Auditors and Self-Regulation

To check if the work claimed by these enterprises is correct, SEBI wants to create Social Auditors. These are trained people who will audit the work of social enterprises. The ICAI will have a new section for this called the Sustainability Directorate.

Also, a Self-Regulatory Organization (SRO) will be created to guide and watch over the Information Repositories (IRs) like DARPAN and GuideStar.

How is India different from other countries?

India stands out as one of the handful of nations piloting a Social Stock Exchange. Alongside it, Canada, Jamaica, and Singapore have developed comparable platforms. However, India’s approach diverges by attempting to construct an entire, integrated ecosystem from the ground up, welcoming both profit-driven and charitable organizations to the same marketplace.

Support from Companies and CSR

Companies can tap into their CSR funds to lend a hand to NPOs listed on the SSE. SEBI has proposed that any surplus CSR funds can be traded to assist those who are in need. This approach not only helps companies hit their CSR goals but also provides NPOs with much-needed financial support.

CS Executive Capital Markets

Students preparing for the CS Executive Capital Markets paper should understand how the Social Stock Exchange works. It shows how finance and social good can come together. This topic is important in understanding modern trends in capital markets.

CS Executive Capital Markets course also teaches how to manage fund-raising tools, compliances, and the reporting system under the SEBI framework.

The Social Stock Exchange is a massive breakthrough for India. It allows social groups to raise funds in the right manner. It brings more clarity and consideration to the device. The function of the company Secretary in the Social Stock Exchange is key in making sure guidelines are observed and goals are achieved. With sturdy aid from SEBI, corporations, and experts, SSE will help bring more funds and better plans to resolve social issues in India.

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