SEBI’s framework for governing council of social stock exchange explained

By Trisha Shreyashi

The Securities & Exchange Board of India (SEBI) in its circular dated 13.10.2022 has issued the framework for the Governing Council of the Social Stock Exchange.Projected as an enabler of access to capital and financial inclusion, the model of SSE is novel to the Indian market. It was first proposed by FM Sitharaman in the Budget Speech of 2019-2020.

The Social Stock Exchange Governing Council (SGC) is tasked with overseeing the smooth and transparent functioning of operations at the SSE.

The constitution of the SGC for each SSE has been mandated under Regulation 292 D of the SEBI ( Issue of Capital & Disclosure Requirements) Regulations, 2018 (ICDR Regulations). The rule has been added under the amendment introduced via the circular.

The SGC shall comprise a minimum of 7 experts from each of the stakeholder categories specified in the circular. The stakeholders are the philanthropic and social sectors including public and private sector donors, non-profit organizations, information repositories, social impact investors, social audit professionals or self-regulatory organizations for social auditors, capacity-building funds, and stock exchange. The Council will be assisted by the administrative staff.

Also read: SEBI inching ahead to set up Social Stock Exchange; here’s what we know so far about the proposed bourse

The SGC shall be required to meet a minimum of four times a year and shall meet as frequently as required. However, the number and frequency of SGC meetings shall be prescribed by the SSE Board. The Board shall also prescribe the procedure and quorum for the meetings, guidelines for potential conflict of interest etc., the circular mentioned.

The SGC shall guide the SSE in terms of registration, onboarding, and listing of social enterprises, fundraising, and disclosures by social enterprises, the circular said. The SGC shall provide expertise towards the development of SSE in terms of growth in listing as well as investors. Further, it shall review the functioning of the exchange including the feedback received from the stakeholders.

The SGC is to be constituted prior to seeking approval of the market regulator for incorporating the SSE as a separate segment, the circular stated.

SSEs have been set up previously in Brazil, Portugal, South Africa, Jamaica, the UK, Canada, and Singapore. However, only four of the seven exchanges are presently functional. The failure of most SSEs has been attributed to institutional drawbacks, administrative lacunae, corruption, regulatory loopholes and insufficient income. SGC is projected to address these issues and ensure accountability in the operations of the segment.

(The author is a lawyer and writer. She is also a panelist at the HBR Advisory Council. Views are personal.)