Table of Contents
Chapter 9: Disclosure Norms, Reporting Requirements by Social Impact Assessor and Penalties
9.1 Initial Disclosure Framework under SEBI ICDR Regulations (Draft Information Memorandum & Final IM)
Regulatory Architecture for Initial Disclosures
Under Chapter X-A of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR), non-profit organizations and for-profit social enterprises must satisfy rigorous disclosure norms prior to issuing social securities on the Social Stock Exchange (SSE). The primary objective is to provide institutional, corporate CSR, and retail donors with complete transparency regarding the social enterprise's governance, past operational track record, financial solvency, and the specific developmental project proposed for funding.
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| INITIAL DISCLOSURE TIMELINE & LIFECYCLE (SEBI ICDR) |
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| Step 1: Draft IM | NPO prepares Draft Information Memorandum (DIM) complying with Schedule XIX-A |
| Preparation | of SEBI ICDR Regulations; approved by Governing Board / Trustees |
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| Step 2: Filing & | DIM filed with the Social Stock Exchange along with non-refundable fee; |
| Public Scrutiny | Hosted on SSE and NPO websites for **minimum 14 calendar days** for public |
| | comments and stakeholder feedback |
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| Step 3: Exchange | SSE scrutinizes disclosures, verifies eligibility criteria (3-yr track record,|
| In-Principle Appr | ₹50L spend, ₹10L receipts, 12AB/80G status), and issues in-principle approval |
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| Step 4: Final IM | Final Information Memorandum incorporating regulatory modifications filed with |
| Filing & Issuance | the SSE; issue opens for public subscription in dematerialized format |
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Comprehensive Disclosure Checklist under Schedule XIX-A
The Information Memorandum must incorporate exhaustive disclosures across six core operational domains:
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| MANDATORY DISCLOSURE CATEGORIES (SCHEDULE XIX-A) |
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| 1. Institutional | - Certified copies of Trust Deed, Society Registration, or Section 8 MoA/AoA |
| Profile | - Details of Key Managerial Personnel (KMP), Trustees, Governing Body members |
| | - Details of related-party transactions and conflict of interest policies |
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| 2. Programmatic | - Line-by-line breakdown of programs executed over preceding 3 financial years|
| Track Record | - Certified outputs delivered, beneficiary demographic reach, geographic areas|
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| 3. Target Project | - Clear definition of social problem mapped to 16 eligible SEBI activities |
| Architecture | - Complete Logic Model (Inputs -> Activities -> Outputs -> Outcomes -> Impact)|
| | - Baseline data points and quantitative milestone delivery timelines |
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| 4. Financial Plan | - Total project cost budget with itemized operational expenditure estimates |
| & Escrow Terms | - Exclusive Escrow Bank Account details for receiving subscription proceeds |
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| 5. Risk Factors | - Project execution risks, dependency on government permissions, key staff loss|
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| 6. Social Audit | - Name and registration credentials of the empaneled Social Impact Assessor |
| Commitments | - Commitment to submit audited Annual Impact Reports within 90 days of FY-end |
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9.2 Continuous Reporting Obligations under SEBI LODR Regulations (Regulation 91E & 91F) and Annual Impact Report (AIR)
Ongoing Continuous Compliance Framework
Once an NPO registers on the Social Stock Exchange—or lists Zero Coupon Zero Principal (ZCZP) instruments—it becomes subject to continuous reporting mandates under Chapter IX-A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR):
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| CONTINUOUS DISCLOSURE CALENDAR UNDER SEBI LODR CHAPTER IX-A |
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| Disclosure Type | Governing Regulation | Statutory Filing Timeline & Authority |
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| Quarterly Fund | Regulation 91D | Submitted to SSE within **45 days** of quarter end; |
| Utilization Cert. | | details planned vs. actual ZCZP fund expenditure |
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| Audited Annual | Regulation 91C | Submitted to SSE within **60 days** of financial |
| Financials | | year-end; full Balance Sheet & Income/Expenditure |
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| Annual Impact | Regulation 91E | Submitted to SSE within **90 days** of financial |
| Report (AIR) | | year-end; authored by independent Social Assessor |
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| Material Event | Regulation 91F | Disclosed to SSE within **7 calendar days** of |
| Disclosures | | occurrence of any material event affecting project |
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The Annual Impact Report (AIR) under Regulation 91E
The Annual Impact Report is the central regulatory mechanism ensuring that listed non-profits deliver promised outcomes. Under Regulation 91E:
- Mandatory Third-Party Audit: The AIR must be audited by an independent Social Impact Assessor registered with the Institute of Social Auditors of India (ISAI).
- Standardized Thematic Metrics: The assessment must be conducted strictly in accordance with the relevant Social Audit Standard (SAS 100 to SAS 1600) corresponding to the project's thematic domain.
- Key Required Reporting Disclosures:
- Baseline measurements versus target vs. actual achieved outputs and outcomes.
- Beneficiary demographic breakdown (gender, SC/ST, rural/urban, income brackets).
- Analysis of unexpected positive or negative side-effects of the intervention.
- Calculation of Deadweight and Attribution to isolate net programmatic impact.
- Beneficiary feedback mechanism, grievances registered, and resolution records.
Material Event Disclosures under Regulation 91F
An NPO must promptly disclose to the exchange any development that could materially affect project execution or investor sentiment:
- Resignation or change in key project heads, trustees, or executive directors.
- Suspension, cancellation, or notice under FCRA or Section 12AB/80G of the Income-tax Act.
- Natural disasters, fires, or civil unrest damaging project field assets.
- Regulatory inspections, investigations, or legal litigations initiated against the entity or promoters.
9.3 Enforcement, Disciplinary Actions, and Penalties under the SEBI Act, 1992 (Sections 15A, 15HA, 15HB)
Statutory Powers of SEBI over Social Capital Markets
Under the Securities and Exchange Board of India Act, 1992 (SEBI Act), the regulator exercises extensive supervisory, investigative, and enforcement powers over all entities registered or listing instruments on stock exchanges, including Social Enterprises and Social Impact Assessors:
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| KEY PENAL PROVISIONS UNDER THE SEBI ACT, 1992 |
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| Statutory Section | Nature of Violation | Monetary Penalty / Sanction Imposed |
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| Section 15A(a) | Failure to furnish information, | Penalty of ₹1 Lakh for each day of default|
| | return, or report to SEBI / SSE | subject to a maximum of **₹1 Crore** |
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| Section 15A(b) | Failure to maintain books of | Penalty of ₹1 Lakh for each day of default|
| | accounts, records, or documents | subject to a maximum of **₹1 Crore** |
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| Section 15HA | Fraudulent and unfair trade | Penalty shall NOT be less than **₹5 Lakh**|
| | practices (e.g., impact fraud, | but may extend up to **₹25 Crore** or |
| | fabricated beneficiary registers) | three times the amount of profits made |
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| Section 15HB | Residual penalty for contravention| Penalty which shall not be less than |
| | of any SEBI regulation/circular | **₹1 Lakh** but may extend to **₹1 Crore**|
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Administrative Actions and Debarments
In addition to financial penalties imposed by an Adjudicating Officer under Chapter VI-A:
- Directions under Section 11 / 11B: SEBI can issue administrative directions debarring the non-profit enterprise, its trustees, or governing board members from accessing the securities market or issuing instruments for a specified period.
- Impounding and Escrow Freezing: SEBI can order the freezing of bank accounts and attachment of unutilized ZCZP proceeds in the escrow account to prevent fund diversion.
- De-Registration and Compulsory De-Listing: The Social Stock Exchange can suspend trading or compulsorily de-register an NPO for continuous compliance failures.
Disciplinary Framework for Social Impact Assessors
If a Social Impact Assessor is found guilty of gross professional negligence, issuing false clean audit opinions, or concealing material fund diversion:
- SRO Disciplinary Mechanism (ISAI): Cancellation of registration, suspension of practice, and expulsion from the Institute of Social Auditors of India.
- SEBI Debarment: SEBI can bar the individual auditor or firm from undertaking social audits or appearing before securities market bodies under SEBI (Intermediaries) Regulations, 2008.