GS Paper 2:
Topics Covered: Protection of vulnerable sections of the society.
Government has come out in support of Securities and Exchange Board of India’s (SEBI) crackdown on unregistered advisors making stock-related suggestions on social media platforms.
What’s the issue?
Many social media platforms including YouTube, Twitter, telegram where advisors which are not registered with SEBI are offering advice on stock markets.
- Now, SEBI is going to tighten its hold on such advisors as this often misleads the investors and harm the market.
The proposal to set up SSEs in the country was first floated during the Union Budget in 2019.
- In September 2019, Sebi constituted a working group under the chairmanship of Tata group veteran Ishaat Hussain.
- In September 2020, Sebi set up the TG as it felt further expert advice and clarity was needed on the WG’s recommendation.
Recommendations made by SEBI’s technical group (TG) on social stock exchanges (SSEs):
Both for-profit (FP) and not-for-profit organisations (NPO) should be allowed to tap the SSE provided they are able to demonstrate that social intent and impact.
Corporate foundations, political and religious organisations should be made ineligible to raise funds using the SSE mechanism.
- Modes available for fundraising:
For NPOs, it shall be equity, zero coupon zero principal bond (ZCZP), development impact bonds, social impact fund, currently known as social venture fund (SVP) with 100 per cent grants-in grants out provision, and donations by investors through mutual funds.
For FP enterprises, it will be equity, debt, development impact bonds, and social venture funds.
- Corpus size of the fund:
Minimum corpus size for such funds be reduced from Rs 20 crore to Rs 5 crore and the minimum subscription amount be reduced from Rs 1 crore to Rs. 2 lakh.
- The capacity building fund for SSE:
It should have a corpus of Rs 100 crore. This fund should be housed under Nabard. Exchanges and other developmental agencies such as SIDBI should be asked to contribute towards this fund.
- List of broad activities based on those identified by Niti Aayog under sustainable development goals that SEs can engage in:
These include eradicating hunger, poverty malnutrition and inequality; promoting gender equality by empowerment of women and LGBTQIA+ communities; training to promote rural sports; and slum area development, affordable housing.
What is social stock exchange (SSE)?
- It is a novel concept in India and such a bourse is meant to serve private and non-profit sector providers by channelling greater capital to them.
- As per the proposal, SSE can be housed within the existing stock exchange such as the BSE and/or National Stock Exchange (NSE).
- With this, Social welfare enterprises and non-profits could soon get to raise so-called social capital on a transparent electronic platform, aiding the process of rebuilding livelihoods ravaged by the coronavirus pandemic.
- These recommendations, if implemented as a package, can result in a vibrant and supportive ecosystem, enabling the non-profit sector to realise its full potential for creating social impact.
Need for social capital:
India will need a significant amount of patient capital to repair and rebuild those livelihoods, which are the bedrock of her economy. Conventional capital that prioritises financial returns will not be able to carry such a burden all by itself.
- Social capital, on the other hand, is more suited for this role. It is not only patient but its goal is precisely to support and fortify social structures that are in danger of collapsing because of COVID-19.
What is a social enterprise?
A social enterprise is a revenue-generating business. Its primary objective is to achieve a social objective, for example, providing healthcare or clean energy.
- This in no way means that a social enterprise can’t be highly profitable. In fact, most social enterprises look and operate like traditional businesses. The only catch is that the profit these entities generate is not necessarily used for payouts to stakeholders, but reinvested into their social programmes.
- What is a social enterprise?
- What is SSE?
- What is social capital?
- SEBI- key functions.
India will need a significant amount of social capital to repair and rebuild those livelihoods, which are the bedrock of her economy. Discuss.