SEBI Proposes Online Bidding to Boost Social Stock Exchange Fundraising

The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing the establishment of an electronic book provider platform for Not-for-Profit Organizations (NPOs) to raise funds through Social Stock Exchanges (SSE). The initiative aims to simplify and streamline the issuance process of financial instruments by NPOs on these exchanges.

Digital Infrastructure for Efficient Issuance

According to SEBI, a not-for-profit organisation (NPO) is permitted to raise funds on the Social Stock Exchange (SSE) by issuing Zero Coupon Zero Principal (ZCZP) Instruments. In order to streamline the issuance of ZCZP instruments issued by NPOs on SSE, and such other instruments as may be specified from time to time for issuance by NPOs, a need is felt to provide a mechanism for the SSE Electronic Book Provider (SSE-EBP) platform, stated the draft circular issued by SEBI.

The consultation paper outlines that the obligations and duties of SSE-EBP would include providing an online platform for placing bids while ensuring that participants are notified about every draft fundraising document (DFRD) filed. Further, the DFRD, term sheet and other issue-related information should be made available to the eligible participants on the platform immediately on receipt of the same from the issuer, as per the SEBI paper. It also mandates that SSE-EBP must "have adequate backup, disaster management and recovery systems... Ensure safety, secrecy, integrity and retrievability of data... SSE-EBP shall ensure that all details regarding the issuance are updated on its website."

Eligibility and Issue Norms for Participants

The SEBI paper also clarifies the criteria for eligible participants. The list of eligible participants on the SSE-EBP platform includes qualified institutional buyers (QIBs) as defined under Regulation 2 (ss) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) and any non-QIB, including non-institutional investors and retail individual investors (except foreign portfolio investors, foreign funds and foreign investor backed funds), who wants to participate in a particular issue on the SSE-EBP platform.

Further, SEBI stated, "Participants, prior to entering into a bidding process shall be required to enrol with SSE-EBP. Such enrolment of a participant on an SSE-EBP will be a one-time exercise and shall be valid till the time such enrolment is annulled or rescinded."

In terms of issue size, SEBI has suggested that any single ZCZP issue of ₹50 lakh or more, or a shelf issue, consisting of multiple tranches, with each issue of ₹50 lakh or more, with the validity of the shelf document being one year, would qualify for the platform.

Read More: Jane Street Entities Made Over ₹36,000 Crore in Derivatives Trading: SEBI!

Conclusion

SEBI’s proposal to introduce the SSE-EBP platform marks a significant step towards enhancing transparency and efficiency in fundraising for NPOs on Social Stock Exchanges. By setting clear guidelines and technological standards, the regulator aims to facilitate wider participation and better governance in the social sector investment landscape.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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