Sebi proposes stricter IPO funds tracking, fines for non-cooperation

The regulator’s consultation paper suggests allowing monitoring agencies to report directly to exchanges and penalizing uncooperative issuers with a ₹50,000 fine and frozen demat accounts.

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

The proposals form part of the report of a working group constituted by Sebi to review the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. In a consultation paper issued 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 empower monitoring agencies to submit their reports directly to stock exchanges within prescribed timelines. Where a listed company fails to cooperate with the monitoring process, the agency would be required to prepare its report on the basis of the best available information and attach a statement of non-cooperation.

A monitoring agency in an IPO is an independent third-party entity appointed by a company to track and verify how it uses the fresh capital raised from public investors.

Tighter disclosures

Sebi has proposed that stock exchanges prominently display monitoring agency reports, along with statements of non-cooperation wherever applicable, on their websites. If the company subsequently provides complete information, the monitoring agency would have to submit a revised report within 15 days of receiving the information, explicitly recording that the non-cooperation has been rectified for the relevant reporting period.

The working group has also recommended a fine of ₹50,000 for each instance of non-cooperation reported by a monitoring agency during the applicable reporting period. Under the enforcement process outlined in the consultation paper, stock exchanges would review compliance and issue notices within 30 days of the report’s due date. Failure to rectify the non-cooperation or pay the fine could lead to notices to promoters and, subsequently, the freezing of their demat accounts in accordance with the prescribed standard operating procedure.

The review also addresses the termination of monitoring agency agreements before full utilisation of issue proceeds. Sebi has proposed that where non-cooperation has been reported, a company should not be permitted to terminate its existing agreement or appoint a new monitoring agency until the issue is rectified and the existing agency can submit a complete report for the relevant period.

Other recommendations by the working group include mandatory appointment of monitoring agencies for all issuances, irrespective of issue size, excluding offer-for-sale amounts; revisions to the monitoring report format; and alignment of the LODR Regulations with the Issue of Capital and Disclosure Requirements Regulations.

Public comments on the proposals have been invited until 3 November 2026.

About the Author

Apoorva is a Mumbai-based journalist at Mint who covers the Securities and Exchange Board of India (SEBI), tracking the pulse of India’s capital markets, regulatory developments and the people who operate within them. She holds a postgraduate diploma in business and financial journalism from the Asian College of Journalism, where she developed a strong foundation in markets, companies, and economic policy. She began her journalism journey with an internship at Bloomberg, where she worked across beats such as real estate, infrastructure, capital markets, and deals, which helped her understanding of business and finance.<br><br>She is guided by the belief that everything in this world can be explained in simple and fewer words, and that idea shapes how she approaches her writing. She aims to cut through complexity and present nuanced regulatory and financial developments in a way that is both accessible and meaningful to readers.<br><br>When she is not tracking market chatter, Apoorva can usually be found deep into a fiction novel or out on a long run. She is also a trained classical dancer in Bharatanatyam, Mohiniyattam, and Kathakali.