Sebi proposes tighter IPO proceeds monitoring, fines for defaulting firms

The Securities and Exchange Board of India (SEBI) recently proposed the creation of mandatory monitoring agencies for all public issues, regardless of their size, and a Rs 50,000 fine for listed companies that fail to cooperate in the monitoring process. These proposals are part of a broader review of SEBI’s LODR Regulations, with the aim of enhancing transparency and accountability in funds raised through public issues.

SEBI's consultation paper suggests that monitoring agencies be mandated for all issuances, except for sizes of an offer for sale. In cases of non-cooperation, the agency would submit a report directly to stock exchanges, based on the best available information and accompanied by a 'statement of non-cooperation.' If the company later provides complete information, the agency must submit a full report to the exchanges within 15 days.

Stock exchanges would be required to prominently display such reports and statements on their websites. SEBI has also proposed a fine of Rs 50,000 for each instance of non-cooperation, and a graded enforcement mechanism with notices to non-compliant companies, their promoters, and even freezing of their demat accounts if non-compliance persists.

Companies are prohibited from changing monitoring agencies while instances of non-cooperation remain unresolved. SEBI is seeking public comments on these proposals until November 3.