Sebi proposes stricter monitoring of IPO funds, fines for non-cooperation

The Securities and Exchange Board of India (Sebi) has proposed a review of the regulatory framework for monitoring the use of funds raised by listed companies, including provisions for direct reporting by monitoring agencies to exchanges and penalties for non-cooperation by issuers.

The proposals form part of a report by a task force set up by Sebi to review the Listing and Disclosure Obligations (LODR) Regulations, 2015. In a consultation paper released on Tuesday, the regulator sought public comments on recommendations aimed at streamlining the framework governing the monitoring and disclosure of issue proceeds.

A key recommendation is to allow monitoring agencies to submit their reports directly to stock exchanges within prescribed deadlines. If a listed company does not cooperate with the monitoring process, the agency would be required to prepare its report based on the best information available and attach a statement of non-cooperation.

A monitoring agency in an IPO is an independent third party appointed by the company to monitor and verify how it uses the new capital raised from public investors.

Stricter disclosure

Sebi has suggested that stock exchanges prominently display monitoring agency reports along with non-cooperation statements on their websites whenever possible. If the company subsequently provides full information, the monitoring agency would have to submit a revised report within 15 days of receiving the information, specifically stating that the non-cooperation has been corrected for the relevant reporting period.

The task force also recommended a fine ₹50,000 for each case of non-cooperation reported by the monitoring agency during the relevant reporting period. Under the enforcement process outlined in the consultation paper, exchanges would monitor compliance and issue notices within 30 days of the report due date. Failure to rectify non-cooperation or non-payment of fine may result in notices to promoters and subsequent freezing of their demat accounts as per prescribed standard operating procedure.

The review also deals with the termination of monitoring agency agreements before the proceeds of the issue are fully utilised. Sebi suggested that where non-cooperation has been reported, the company should not be allowed to terminate its existing contract or appoint a new monitoring agency until the problem is rectified and the existing agency is able to submit a complete report for the relevant period.

Other recommendations of the task force include the mandatory appointment of monitoring agencies for all issues, regardless of issue size, except for amounts offered for sale; revision of monitoring report format; and alignment of LODR regulations with capital issuance regulations and disclosure requirements.

Public comments on the proposals were invited until 3 November 2026.