India’s markets regulator wants monitoring agencies appointed for every initial public offering, with quarterly reports, fines and possible promoter account freezes to deter misuse of share-sale proceeds.
India’s markets regulator is moving to tighten oversight of how companies use money raised from share sales, in a sign that it wants to curb misuse of public issue proceeds even as it tries to make fundraising easier for issuers. The Securities and Exchange Board of India has proposed a stricter monitoring framework that would apply to all initial public offers, regardless of size, and is seeking public comments on the plan until 3 November 2026.
Under the consultation paper, every issuer would need to appoint a monitoring agency to track whether proceeds are being used for the purposes set out in the offer document. At present, that requirement applies only above certain thresholds, but the new proposal would remove the size-based exemption while excluding money raised through offer-for-sale transactions, according to reports by LiveMint and Business Standard.
The proposed system would also change how compliance is reported. Monitoring agencies would send their findings directly to stock exchanges within 45 days of the end of each quarter, after first sharing a draft with the company for review by its audit committee. If a company fails to provide enough information or supporting evidence, the agency would have to file a statement of non-cooperation alongside its report, LiveMint reported. Business Standard said the regulator wants exchanges to issue notices and levy a fine of ₹50,000 for each breach, with further action that could eventually include freezing promoters’ demat accounts.
The idea is to create a more forceful deterrent against diversion of IPO money, an issue that has drawn close scrutiny from SEBI in recent cases. The Hindu BusinessLine said the regulator has uncovered instances in which funds meant for business expansion were allegedly channelled into unrelated activities, including luxury spending and hospitality ventures. But the editorial also raised doubts about whether credit rating agencies, which are expected to serve as monitoring agencies, have the investigative capacity to carry out proper physical checks, and whether their commercial ties to issuers could compromise independence. It also questioned whether stock exchanges are equipped to act as effective frontline enforcers, even though the new regime would place much of the burden on them.
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