India’s markets regulator has proposed compulsory monitoring of fundraising proceeds and a stepped enforcement process that could see stock exchanges fine non-compliant companies and seek freezes on promoters’ demat accounts.
India’s markets regulator has proposed a tougher regime for tracking how listed companies spend money raised from investors, in a move that would give stock exchanges a more direct role in enforcement and could ultimately lead to the freezing of promoters’ demat accounts if firms refuse to co-operate.
The Securities and Exchange Board of India, or Sebi, said in a consultation paper issued on Tuesday that it wants monitoring agencies to report directly to exchanges when companies do not share information or otherwise obstruct oversight of issue proceeds. The proposal comes from a working group led by V S Sundaresan, a former Sebi executive director, which reviewed the rules in the Listing Obligations and Disclosure Requirements framework, known as LODR.
Under the draft changes, appointing a monitoring agency would become compulsory for all fund-raising exercises, regardless of size, apart from the offer-for-sale component. If a company withholds information, the agency would still file a report using the best available material, together with a formal note saying the issuer did not co-operate. According to the consultation paper, stock exchanges could then impose a fine of ₹50,000 for each instance of non-co-operation reported in a quarter or half-year, with notices to follow within 30 days of the report deadline.
If the company still failed to file a complete report or pay the penalty within 15 days of the notice, exchanges would issue a warning to promoters. A further 10-day default could trigger a request to depositories to freeze the promoters’ demat accounts under the existing standard operating procedure. Sebi also said a company flagged for non-co-operation would not be allowed to end its contract with the monitoring agency, or appoint a replacement, until the issue is corrected and a full report is submitted for that period.
The regulator is also seeking to tidy up the rules by moving report timetables out of the Issue of Capital and Disclosure Requirements regulations and into the LODR framework. Non-payment of the monitoring fee itself would not count as non-co-operation, although agencies could ask for the full amount in advance and would have to return any unused portion if the agreement ends before the proceeds are fully deployed. If the company later fixes the breach, the agency would have to file an updated report within 15 days confirming that the problem had been resolved. Public comments on the proposals are open until 3 November 2026. Business Standard reported that the consultation paper covers only one part of the working group’s wider review, which also includes related-party transactions and penalties for listed-company non-compliance.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
