The concept of a Social Stock Exchange was first introduced by SEBI through its circular on September 19, 2022. The idea behind SSE is to allow social enterprises and social impact funds to raise capital by listing their securities in a regulated environment. It provides a unique opportunity for investors to put their money into organizations that aim to generate a social return along with financial returns.
The framework for SSE was subsequently amended in 2023 to refine the regulations and introduce new guidelines. However, based on the recommendations from the Social Stock Exchange Advisory Committee and public comments received in response to the consultation paper, SEBI has decided to make an important revision in the minimum application size for subscribing to Zero Coupon Zero Principal (ZCZP) Instruments.
Key Amendment: Reducing the Minimum Application Size
Prior to the new circular, the minimum application size for subscribing to ZCZP Instruments was set at Rs. 10,000. However, SEBI has now reduced the minimum subscription amount to Rs. 1,000. This change is a significant move towards making the Social Stock Exchange more inclusive and accessible to a broader range of investors. The new rule allows individuals with smaller amounts of capital to invest in socially responsible enterprises, thus fostering greater participation from retail investors.
For context, ZCZP instruments are a form of debt instrument where the investor does not receive periodic interest or principal payments. Instead, these instruments are issued at a discount to their face value, and the investor receives the full face value at maturity. This makes them particularly attractive for social enterprises that require funds without incurring the regular obligations of interest payments, which may be difficult for them to meet.
By reducing the minimum investment size to Rs. 1,000, SEBI is aligning with the idea of democratizing investment opportunities. This move is likely to encourage greater participation from small investors who are eager to support social causes but may have been previously deterred by the higher investment threshold.
The Rationale Behind the Change
The decision to revise the application size stems from SEBI’s commitment to fostering inclusivity in the social impact space. Social enterprises and social impact funds often operate with limited resources and may struggle to access traditional funding avenues. By lowering the entry barrier for investors, SEBI is empowering more people to invest in organizations that aim to tackle pressing social challenges such as education, healthcare, and environmental sustainability.
Furthermore, this change also reflects SEBI’s proactive stance in responding to public feedback. The consultation process, which included input from various stakeholders, allowed SEBI to fine-tune its regulations to better meet the needs of both investors and social enterprises. The revised circular strengthens the Social Stock Exchange framework, aligning it with global best practices in socially responsible investing.
