The Securities and Exchange Board of India (SEBI) has initiated a review of the regulatory framework concerning the monitoring of funds raised by listed companies. This initiative includes provisions for direct reporting by monitoring agencies to stock exchanges and the introduction of penalties for issuers who fail to cooperate. The proposals are part of a report from a working group established by SEBI to reassess the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015.

On 3 October, SEBI issued a consultation paper inviting public comments on the recommendations aimed at enhancing the framework that governs the monitoring and disclosure of issue proceeds. The regulator emphasised the need for improved transparency and accountability in the utilisation of funds raised through public offerings.

A significant recommendation from the working group is to grant monitoring agencies the authority to submit their reports directly to stock exchanges within specific timelines. In instances where a listed company does not cooperate with the monitoring process, the agency would compile its report based on the best available information and include a statement regarding the lack of cooperation.

Enhanced Reporting and Penalties Proposed

In its proposals, SEBI has suggested that stock exchanges prominently display reports from monitoring agencies on their websites, along with any statements of non-cooperation when applicable. If a company later provides the necessary information, the monitoring agency would be required to submit a revised report within 15 days, clearly stating that the non-cooperation issue has been resolved for the relevant reporting period.

Additionally, the working group has recommended imposing a fine of ₹50,000 for each instance of non-cooperation reported by a monitoring agency during the applicable reporting period. This measure aims to encourage compliance and ensure that companies adhere to the established monitoring processes.

Under the enforcement procedures outlined in the consultation paper, stock exchanges would be responsible for reviewing compliance and issuing notices within 30 days of the report’s due date. Should a company fail to rectify the non-cooperation or pay the associated fine, notices may be issued to promoters, potentially leading to the freezing of their demat accounts as per the prescribed standard operating procedures.

Further Recommendations and Public Consultation

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

Other recommendations from the working group include the mandatory appointment of monitoring agencies for all issuances, regardless of their size, excluding offer-for-sale amounts. Revisions to the format of monitoring reports and alignment of the LODR Regulations with the Issue of Capital and Disclosure Requirements Regulations have also been suggested.

Public comments on these proposals are invited until 3 November 2026, allowing stakeholders to provide their input on the regulatory changes aimed at improving the oversight of issue proceeds in the Indian capital markets.

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