Executive Summary:
This circular, issued by the Securities and Exchange Board of India (SEBI) on October 13, 2022, outlines the framework for the Governing Council of the Social Stock Exchange (SSE). It specifies the composition and terms of reference for the Social Stock Exchange Governing Council (SGC) as per Regulation 292D of the ICDR Regulations. Stock Exchanges are required to constitute a Governing Council for the SSE before seeking final approval from SEBI for the introduction of the SSE.
Key Points / Main Content:
Composition of SGC:
* The SGC shall comprise individuals with relevant expertise to contribute to the development of SSE.
* It should have a balanced representation from philanthropic and social sectors, nonprofit organizations, information repositories, social impact investors, social audit profession/self-regulatory organization for social auditors, capacity building funds, and the Stock Exchange.
* The SGC must have a minimum of 7 members, with representation from each category.
* The SGC will be supported by administrative staff from the SSE.
* The Stock Exchange board shall prescribe procedures, frequency, quorum for SGC meetings, and guidelines for handling potential conflicts of interest.
* The SGC should meet as frequently as required, with a minimum of four meetings per financial year.
Terms of Reference:
* The SGC will provide oversight and guidance for the smooth functioning of the SSE, regarding registration, fundraising, and disclosures by Social Enterprises.
* The terms of reference include providing expertise for the SSE's development, overseeing the listing function, facilitating effective oversight on the adequacy of disclosures, and reviewing the functioning of the SSE.
* The SGC shall also address any other matter related to governance and development of SSE.
Implementation:
* Stock Exchanges must constitute the SGC before seeking final approval from SEBI to introduce the SSE as a separate segment.
Impact Analysis:
Recognized Stock Exchanges:
* Impact: Required to establish a Social Stock Exchange Governing Council (SGC) with the specified composition and terms of reference.
* Action Required: Constitute a Governing Council for the Social Stock Exchange before seeking final approval from SEBI for the introduction of the SSE as a separate segment.
Social Enterprises:
* Impact: Subject to oversight and guidance from the SGC regarding registration, fundraising, and disclosures.
* Action Required: Adhere to the procedures and guidelines established by the SGC for onboarding, listing, and disclosures.
Investors:
* Impact: Protection of their interests in the securities market through the regulation and development of the SSE.
* Action Required: Monitor disclosures and activities of Social Enterprises listed on the SSE.
Securities and Exchange Board of India (SEBI):
* Impact: Responsible for overseeing the establishment and functioning of the SSE and its Governing Council.
* Action Required: Provide final approval for the introduction of the SSE as a separate segment after the Stock Exchange constitutes the SGC.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body for the securities market in India.
Social Stock Exchange (SSE): A platform for listing and trading securities of social enterprises and voluntary organizations.
Social Stock Exchange Governing Council (SGC): A council constituted by the Social Stock Exchange to oversee its functioning.
Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations, 2018 (ICDR Regulations): Regulations pertaining to the issuance of capital and disclosure requirements by companies.
Securities and Exchange Board of India Listing Obligations and Disclosure Requirements Regulations, 2015 (LODR Regulations): Regulations pertaining to the listing obligations and disclosure requirements for listed entities.
Securities and Exchange Board of India Alternative Investment Funds Regulations, 2012 (AIF Regulations): Regulations governing Alternative Investment Funds in India.
Securities and Exchange Board of India Act, 1992: The act that established the Securities and Exchange Board of India and defines its powers and functions.
Susanta Kumar Sahoo: Deputy General Manager at Securities and Exchange Board of India (SEBI), Market Regulation Department.
CIRCULAR
SEBI/HO/MRD/MRD-RAC-2/P/CIR/2022/141 October 13, 2022
To
All Recognized Stock Exchanges
Dear Sir / Madam,
Sub: Governing Council for Social Stock Exchange (“SSE”)
1. Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2018 (“ICDR Regulations”), Securities and Exchange
Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
(“LODR Regulations”) and Securities and Exchange Board of India (Alternative
Investment Funds) Regulations, 2012 (“AIF Regulations”) were amended vide
Gazette notification dated July 25, 2022, to provide a framework for Social Stock
Exchange.
2. As per Regulation 292D of the ICDR Regulations, every Social Stock Exchange
shall constitute a Social Stock Exchange Governing Council to have an oversight
on its functioning, with composition and terms of reference as specified by the
Board. Aspects related to the Social Stock Exchange Governing Council (“SGC”)
are specified below:
1) Composition of SGC
a) The SGC shall comprise of individuals with relevant expertise who can
contribute to the development of SSE. It shall have a balanced
representation, drawing from various categories of stakeholders such as:-
i. Philanthropic and social sectors including public / private sector
donors,
ii. Non-profit organizations
iii. Information Repositories
iv. Social Impact Investors
v. Social Audit Profession / self-regulatory organization for social
auditors,
vi. Capacity Building Fund
vii. Stock Exchange.
b) SGC will have a minimum of 7 members having representation from each
of the said categories (i to vii above)
c) SGC shall be supported by administrative staff from the SSE.
Page 1 of 2d) The Board of the Stock Exchange shall prescribe the procedure,
frequency, quorum etc for the meetings of SGC as well as guidelines for
handling potential conflict of interest, if any.
e) SGC shall meet as frequently as required with minimum of four meetings
in a financial year.
2) Terms of Reference
The SGC is expected to provide oversight and guidance to facilitate the
smooth functioning of the operations of the Social Stock Exchange, with regard
to registration, fund raising and disclosures by Social Enterprises. Accordingly,
the terms of reference of the SGC shall include the following:
a) Provide expertise towards development of the SSE including growth of
registration/ listing of social enterprises and number of investors.
b) Oversee the listing function of SSE and provide guidance in laying down
procedures for on-boarding and listing of Social Enterprises.
c) Facilitate effective oversight on the adequacy of disclosures made by
Social Enterprises and guide development of necessary systems and
processes towards the same.
d) Review the functioning of the SSE, including feedback received from
stakeholders.
e) Any other matter related to governance and development of SSE.
3. The Stock Exchange shall constitute a Governing Council for the Social Stock
Exchange prior to seeking final approval from SEBI for introduction of Social Stock
Exchange as a separate segment.
4. This circular is being issued in exercise of the powers conferred under Section 11(1)
of Securities and Exchange Board of India Act, 1992, read with Regulation 292D of
Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2018 to protect the interest of investors in securities
market and to promote the development of, and to regulate the securities market.
5. This circular is available on SEBI website at www.sebi.gov.in at “Legal→Circulars”
Yours faithfully,
Susanta Kumar Sahoo
Deputy General Manager
Market Regulation Department
Email: sksahoo@sebi.gov.in
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