Regulatory updates

In July 2022, the Securities and Exchange Board of India (SEBI) had introduced regulations pertaining to the Social Stock Exchange (SSE), It issued amendments to the following regulations:

1. The SEBI (Issue of Capital and Disclosure Requirements ) Regulations, 2018 (ICDR Regulations)⁶,
2. The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations)⁷, and
3. The SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations)⁸

Regulation 292D of the ICDR Regulations lays down the requirement for an SSE to constitute a Social Stock Exchange Governing Council (SGC)⁹ . In this regard, SEBI, vide a circular dated 13 October 2022 has prescribed details with respect to the composition and other terms of reference of the SGC. Some of the key guidelines issued include:

• Composition: The SGC must have a minimum of seven members, having representation from each of the seven prescribed categories¹⁰ in order to contribute to the functions and development of the SSE.
• Meetings of the SGC: The SGC would be required to have a minimum of four meetings in a financial year. The Board of the stock exchange should prescribe the procedure, frequency, quorum and other details for the meetings of the SGC.
• Other terms of reference: The main objective of establishing the SGC is to provide an oversight and guidance for facilitating smooth functioning of the operations of the SSE. A few important considerations in this regard include:

• Development of SSE: The SGC should provide expertise on matters relating to the listing function of SSE, growth of registration/listing of Social Enterprises (SEs) and the number of investors and the related procedures regarding their onboarding.
• Disclosures by SE: Oversee the adequacy of disclosures made by the SEs and facilitate development of the appropriate systems and processes towards the same.
• Review functioning of SSE: Review the functioning of the SSE by taking into consideration the feedback received from various stakeholders, and
• Other matters: Other matters regarding governance and development of the SSE.

To access the text of the circular, please click here

6. The amendments were issued by the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022 (ICDR Amendment Regulations).
7. The amendments were issued by the SEBI LODR (Fifth Amendment) Regulations, 2022 (LODR Amendment Regulations)
8. The amendments were issued by the SEBI AIF (Third Amendment) Regulations, 2022 (AIF Amendment Regulations)
9. SGC is required to be constituted prior to seeking final approval from SEBI regarding introduction of SSE as a separate segment
10. The categories include:
    1. Philanthropic and social sectors including public/private sector donors,
    2. Not for Profit Organisations (NPOs),
    3. Information repositories,
    4. Social impact investors,
    5. Social audit profession/self-regulatory organisation for social auditors,
    6. Capacity building fund, and
    7. Stock exchange.