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Market regulator Securities and Exchange Board of India (SEBI) has proposed to significantly reduce the minimum value of investment by individual investors in Social Impact Funds (SIFs) in a bid to deepen participation and strengthen the Social Stock Exchange (SSE) framework.
In a consultation paper for public comments published on Monday, SEBI said that, based on deliberations held with the Social Stock Exchange Advisory Committee (SSEAC), it has proposed to reduce the minimum value of investment by individual investors in SIFs from rupees two lakh to rupees one thousand. It stated, "Based on the deliberations held with the SSEAC, it is proposed to reduce the minimum value of investment by individual investors in SIFs from rupees two lakh to rupees one thousand". A Social Impact Fund (SIF) is a SEBI-regulated, privately pooled investment vehicle that invests its funds into social ventures, such as non-profits or for-profit social enterprises, to solve societal problems like poverty or healthcare gaps. Classified as a Category I Alternative Investment Fund (AIF), it allows investors to earn financial returns while creating measurable social impact SEBI noted that under the existing provisions of the SEBI (Alternative Investment Funds) Regulations, 2012, an individual investor is required to make a minimum investment of rupees two lakh in a Social Impact Fund that invests only in securities of Not for Profit Organisations (NPOs) registered or listed on a Social Stock Exchange. The proposed change aims to make such investments more accessible to a larger number of investors. The regulator explained that the proposal is intended to align the minimum investment requirement under the AIF Regulations with the minimum application size prescribed for subscription to Zero Coupon Zero Principal Instruments (ZCZP) under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. The minimum application size for ZCZP is currently rupees one thousand from March 19, 2025. SEBI said that aligning these thresholds would help attract small investors and encourage broader participation in funding social enterprises through SIFs. The consultation paper also highlighted that the proposal is part of a broader review undertaken by SEBI, in consultation with the SSEAC, to further strengthen the Social Stock Exchange framework. Apart from lowering the minimum investment value in SIFs, SEBI has also proposed extending the period of registration for not-for-profit organisations on the Social Stock Exchange without raising funds, and reducing the minimum subscription requirement for issuance of Zero Coupon Zero Principal Instruments. According to the SEBI, the current framework allows an NPO to remain registered on the Social Stock Exchange for a maximum period of two years without raising funds. SEBI has proposed extending this period by one additional year, subject to approval by the Social Stock Exchanges, to address practical challenges faced by NPOs, such as delays in statutory approvals. Further, SEBI has also proposed reducing the minimum subscription requirement for issuance of ZCZP from 75 per cent to 50 per cent in specific cases where project costs and outcomes can be proportionately allocated on a per-unit basis. This move is aimed at encouraging greater participation by NPOs and facilitating smoother fundraising on the Social Stock Exchange platform. SEBI has invited public comments and suggestions on the proposed changes, including the reduction in the minimum value of investment in Social Impact Funds, as part of the consultation process. The regulator said the feedback received will be considered before taking a final decision on the proposed amendments. (ANI)
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