Sebi board clears frameworks for gold, social stock exchanges

With regard to fundraising, Sebi said eligible NPOs may raise funds through equity, zero-coupon zero principal bonds, mutual funds, social impact funds, and development impact bonds. NPOs desirous of raising funds on the SSE will be required to be registered with the exchange.

The regulator said that social venture funds under Sebi's Alternative Investment Funds norms will be rechristened as social impact funds. Also, the corpus requirements for such funds will be reduced from Rs 20 crore to Rs 5 crore. Further, the reference to "muted returns" will be removed. Sebi said it will make suitable amendments to its regulatory framework, towards mandating initial and continuous disclosures for social enterprises, covering aspects relating to governance, financial and social impact.

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It, further, said that social audit will be mandated for SEs raising funds or registered on SSE. To begin with, only reputed firms/ institutions having expertise in the area of social audit will be allowed to carry out social audits employing social auditors who have qualified the certification course conducted by NISM. Further, a separate sustainability directorate under ICAI will function as an SRO for social auditors.

The regulator said it will engage with NABARD, SIDBI and stock exchanges towards institution of a capacity building fund, with a corpus of Rs 100 crore. Operationalisation of the framework will require amendments to several norms and those will be taken up by Sebi, the regulator said. In May, a Sebi panel suggested that corporate foundations, political and religious organisations, among other entities should not be allowed to be on the SSE.

The social stock exchange 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. The idea of SSE was first floated by Finance Minister Nirmala Sitharaman in her Budget Speech 2019-20.

On the gold exchange, Tyagi said a proposal has been cleared for setting up a gold exchange wherein the yellow metal will be traded in the form of electronic gold receipts and the bourse will help in having a transparent domestic spot price discovery mechanism. The instruments representing gold will be called Electronic Gold Receipts (EGRs) and will be notified as securities.

"EGRs will have the trading, clearing and settlement features akin to any other securities," he said. Any recognised stock exchange, existing as well as new, can launch trading in EGRs in a separate segment. The denomination for trading of EGR and conversion of EGR into gold can be decided by the stock exchanges with the approval of Sebi.

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The gold exchange, encompassing the entire ecosystem of trading of EGR and physical delivery of gold, is expected to create a vibrant gold ecosystem in India, Sebi said. According to the regulator, the exchange would be a national platform for buying and selling EGRs with underlying standardised gold in India and also create a national pricing structure for gold.

"The gold exchange is expected to offer a host of benefits for the value chain participants as well as for the entire gold market ecosystem such as efficient and transparent price discovery, investment liquidity, assurance in the quality of gold etc," Sebi noted. The clearing corporation will settle the trades executed on the stock exchanges by way of transferring EGRs and funds to the buyer and seller respectively.

The EGR holder can continue to hold the EGRs as long as intended since EGRs will have perpetual validity. Such holder at his discretion can also withdraw the underlying gold from the vaults upon surrender of EGRs. To lower the costs associated with withdrawal of gold from the vaults, Sebi said EGRs will be made "fungible" and "interoperability between vault managers" will be allowed.

Spelling out the criteria for vault managers, Sebi said vault manager should be a body incorporated in India and should have a net worth of at least Rs 50 crore. The vault manager will be registered and regulated as a Sebi intermediary for providing vaulting services meant for gold deposited to create EGRs.

The obligations of the vault manager include accepting deposits, storage and safekeeping of gold, creation as well as withdrawal of EGR, grievance redressal and periodic reconciliation of physical gold with the records of depository. Presenting the Budget for 2021-22, Finance Minister Nirmala Sitharaman had said that Sebi will be the regulator for gold exchange and Warehousing Development and Regulatory Authority (WDRA) will be strengthened to set up the commodity market ecosystem.

The board also cleared a proposal to amend de-listing framework after an open offer.