Self-Regulatory Organisation

A Self-Regulatory Organisation (SRO) is a body that sets rules for its own members. It also makes sure they follow them. It does this inside a framework set by the regulator.

On the Social Stock Exchange (SSE), this matters in one place: the Social Impact Assessor. SEBI regulates the SSE. But it did not make itself the body that registers every assessor.

Instead, the ICDR definition sets out who an assessor is. It is an individual registered with a self-regulatory organisation under the Institute of Chartered Accountants of India, or such other agency as SEBI specifies. That person must also have passed the NISM certification. And they must hold a valid certificate.

So the SRO is the assessor's professional home. It does three things:

• it registers the assessor;
• it empanels them, which means it puts them on its approved list;
• it issues the code of conduct.

That code sets rules on independence and ethics. The assessor confirms they meet them in every social impact assessment report.

The idea is not new to Indian markets. Chapter 11 sums up the SEBI Act. It lists regulating self-regulatory organisations as one of SEBI's jobs.

Which SROs exist (Chapter 2, 2.2.6). The first SRO is the Institute of Social Auditors of India (ISAI), a not-for-profit Section 8 company under the Companies Act, 2013, set up under the aegis of ICAI. SEBI's May 2024 circular specifies two more:

Who can register as an assessor (Chapter 5, 5.3.3). A CA, CS or CMA; a UGC-recognised post-graduate with at least 3 years in the development sector; a UGC-recognised graduate with at least 6 years; or any other person with suitable accreditation and at least 6 years. All must also clear the NISM certification.

Empanelment criteria (5.3.5). Every assessor must be empanelled with an SRO. The SRO weighs:

• experience in assuring non-financial information, with social sector experience carrying a higher positive weight;
• for a firm or institution, the number of partners or employees who meet the assessor criteria;
• disciplinary cases or sanctions, which carry a negative weight;
• over time, more parameters such as the size and complexity of funders and projects, and specific sector expertise (nutrition, education, health, water and sanitation, energy, climate).

Code of conduct. Chapter 2 says it covers integrity, objectivity, confidentiality, professional behaviour, competence and due care, documentation, due diligence and compliance. Element 16 of the report template (Chapter 5) is a statement that the assessor complies with the independence and ethical requirements of the code of conduct issued by the SRO / SEBI.

Names and figures are illustrative.

Kavita Deshmukh is a cost accountant in Nagpur. She clears the NISM Social Impact Assessor certification and applies to ICMAI SAO, the SRO under her own institute.

1. Registration. As a CMA she meets the qualification limb outright. She does not need the 3-year or 6-year development-sector experience that a post-graduate or graduate would need.
2. Empanelment. She has spent four years assuring CSR spending reports for companies in Vidarbha. That non-financial assurance work counts in her favour, and because it is social-sector work it carries a higher positive weight. She has no disciplinary history, so nothing counts against her.
3. The engagement. A Social Impact Assessment Organisation engages her for a Wardha trust that raised ₹75 lakh through a ZCZP issue for a school-nutrition project.
4. The report. Following the Chapter 8 template, her report quotes her SRO registration number and confirms that she has applied the code of conduct issued by the SRO.

Now suppose a complaint later shows she signed off numbers she knew were overstated. The code's integrity principle forbids an assessor from knowingly being associated with materially false or misleading information. Under the empanelment criteria, any disciplinary case or sanction arising from it would carry a negative weight against her.

Chapter 2 (10% weightage) introduces the SRO in 2.2.3 and 2.2.6, where the three SROs are named. Chapter 5 (10%) gives the ICDR definition of an assessor (5.3.1), the qualification routes (5.3.3), the empanelment criteria (5.3.5) and the report element on the SRO's code of conduct. Chapter 8 (15%) shows a sample report quoting an SRO registration number. Chapter 11 notes that SEBI regulates self-regulatory organisations under the SEBI Act. Expect "with whom must a Social Impact Assessor be registered?" and questions on which factor carries a positive or negative weight at empanelment.

• Registered with an SRO, not with SEBI or NISM. NISM runs the certification. The SRO registers and empanels. SEBI regulates the SSE and specifies which agencies may act as SROs.
• ISAI is the SRO, ICAI is its parent. "The assessor registers with ICAI" is not what the definition says. It says an SRO under ICAI, or another agency SEBI specifies.
• There are three SROs, not one. ISAI (ICAI), ICMAI SAO (Cost Accountants) and ICSI ISA (Company Secretaries).
• The workbook words this three ways. The ICDR definition says an SRO "under ICAI or such other agency as SEBI specifies". Chapter 2 names all three SROs. Chapter 5 (5.3.3) says assessors register "with an SRO under the Institute of Social Auditors of India (ISAI)", although ISAI is itself the SRO. Read all three as registration with a SEBI-specified SRO.
• ISAI is a Section 8 company, a not-for-profit, not a statutory body.
• Weights at empanelment. Social-sector experience is a higher positive weight. Disciplinary cases are a negative weight. Examiners swap them.
• The SRO is not the SSE Governing Council. The Governing Council oversees an exchange's SSE segment. The SRO governs individual assessors.