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

Sebi has proposed a tighter system for tracking how listed companies use money raised from investors. Monitoring agencies would send their reports directly to stock exchanges within prescribed timelines. Exchanges would prominently publish those reports, including any statement that a company failed to cooperate. The aim is to make use of issue proceeds easier to check and harder to obscure.

If a company withholds information, the monitoring agency would prepare its report using the best available information. It would attach a statement of non-cooperation. A company could later provide complete information, prompting a revised report within 15 days. The report would state that cooperation was restored for the relevant period.

The proposals also include a ₹50,000 fine for each reported instance of non-cooperation. Exchanges would review compliance and issue notices within 30 days of the report due date. Sebi also wants monitoring agencies for all issuances, regardless of issue size, excluding offer-for-sale amounts. Public comments close on 3 November 2026.

A monitoring agency is an independent third-party entity appointed by a company during an IPO. Its job is to track and verify how the company uses fresh capital raised from public investors. This creates an outside check on money that a company has collected for stated purposes. The framework matters because investors need information about whether those proceeds are being used as promised.

For example, if a company raises fresh capital for a stated plan, the monitoring agency reviews available information about the money’s use. It then prepares a monitoring report for the relevant reporting period. Under Sebi’s proposal, the agency would send that report directly to the stock exchange within the prescribed timeline.

If the company does not cooperate, the agency would still prepare a report using the best available information. It would attach a statement of non-cooperation. If complete information later arrives, the agency must submit a revised report within 15 days and record that cooperation was rectified for the relevant period.

Sebi’s working group has recommended that monitoring agencies be appointed for all issuances, irrespective of issue size. The proposed coverage would exclude offer-for-sale amounts. This would broaden the framework beyond a size-based approach and place monitoring requirements across issues that raise fresh capital.

The distinction matters because a company’s fresh issue proceeds are the money being raised from public investors. An offer for sale involves amounts excluded from this proposed requirement, according to the article. For covered issuances, a monitoring agency would track and verify how the fresh capital is used and report its findings.

The proposal is part of Sebi’s review of the Listing Obligations and Disclosure Requirements Regulations, 2015. It also includes a revised monitoring report format and alignment with the Issue of Capital and Disclosure Requirements Regulations. The changes are not yet final. Sebi has invited public comments until 3 November 2026, after which the framework could be refined.

If a company does not cooperate, its monitoring agency would not simply stop reporting. The agency must prepare a report using the best available information and attach a statement of non-cooperation. This creates a public record that the company did not provide the information needed for complete monitoring.

The working group has proposed a fine of ₹50,000 for each non-cooperation instance during the applicable reporting period. Stock exchanges would review compliance and issue notices within 30 days of the report’s due date. If the company does not rectify the issue or pay the fine, exchanges could issue notices to promoters.

The proposed enforcement process could then lead to freezing the promoters’ demat accounts under the prescribed standard operating procedure. A company also could not terminate its monitoring agency agreement or appoint a replacement while non-cooperation remained unresolved. If complete information later arrives, the existing agency must submit a revised report within 15 days.

Sebi wants monitoring agencies to report directly to stock exchanges so the reporting process does not depend entirely on the company’s cooperation. A company that delays or withholds information should not be able to prevent a monitoring report from being filed. Direct reporting gives the exchange a timely account of the issue and any problem affecting verification.

Under the proposal, the agency would prepare its report from the best available information when the issuer does not cooperate. It would attach a statement of non-cooperation. Stock exchanges would then prominently display the report and the statement on their websites. This mechanism preserves reporting even when the information is incomplete.

The company would still have a route to correct the record. If it later provides complete information, the monitoring agency must submit a revised report within 15 days. The revised report must explicitly state that non-cooperation was rectified for the relevant reporting period. Sebi has invited comments before deciding on the proposals.

Publicly displaying monitoring reports would give investors direct access to information about a company’s use of issue proceeds. Investors could review the agency’s account instead of relying only on statements from the company. They could also see whether the report was complete or carried a statement that the company had not cooperated.

For example, an exchange website could show a monitoring agency’s report alongside a non-cooperation statement. That would alert investors that the agency had to work with the best available information. If the company later supplied complete details, the exchange could display the revised report, which must say that non-cooperation was rectified for the relevant period.

This would make gaps in disclosure more visible and create pressure for companies to provide information promptly. The proposal also links non-cooperation to a ₹50,000 fine, notices, and possible promoter demat-account freezing. These measures are proposed, not yet final, while public comments remain open until 3 November 2026.

An IPO, or initial public offering, is a process through which a company offers shares to public investors and raises capital. When the money represents fresh capital, it goes to the company for the purposes described in the issue documents. This gives the company access to public funding and gives investors an opportunity to invest in it. The article focuses on how that money is used after the offering.

After an IPO, an independent monitoring agency tracks and verifies the company’s use of fresh capital. It prepares reports for the relevant reporting periods. Under Sebi’s proposal, the agency could report directly to stock exchanges and the reports would be publicly displayed. If the company does not cooperate, the agency would use the best available information and disclose that problem.

The proposal would require monitoring agencies for all issuances, regardless of size, excluding offer-for-sale amounts. It also includes fines and further enforcement for non-cooperation. Sebi is seeking public comments until 3 November 2026, so these changes remain proposals rather than final rules.