Summary of this article
Sebi proposes monitoring agencies for all issuances, excluding offer-for-sale amounts
Companies could face Rs 50,000 fines for each reported instance of non-cooperation
Continued non-compliance could lead to promoters’ demat accounts being frozen
The Securities and Exchange Board of India (Sebi) has proposed making monitoring agencies mandatory for all public and other specified issuances, regardless of issue size, excluding the offer-for-sale component. The proposals also include fines for companies that fail to cooperate with monitoring agencies and the eventual freezing of promoters’ demat accounts if non-compliance continues.
In a consultation paper issued on October 13, the regulator proposed changes to the framework governing the monitoring and disclosure of funds raised by listed companies under the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015.
According to the proposed rules, monitoring agencies would be allowed to submit reports directly to stock exchanges if companies withhold information, delay submissions or fail to provide supporting documents. Such reports would be based on the best available information and accompanied by a statement of non-cooperation.
If a company subsequently provides complete information, the monitoring agency would have to submit a revised report within 15 days of receiving it. Stock exchanges would also be required to prominently display monitoring agency reports and statements of non-cooperation on their websites.
Promoters’ Demat Accounts Could Be Frozen
Sebi has proposed a fine of Rs 50,000 for each instance of non-cooperation reported by a monitoring agency during the applicable quarterly or half-yearly reporting period.
Stock exchanges would review compliance and issue notices to companies within 30 days of the due date for submitting monitoring agency reports. If the company fails to rectify the non-cooperation, submit a complete report or pay the fine within 15 days of receiving the notice, the exchanges would issue notices to its promoters.
If the issue remains unresolved 10 days after the promoter notice, stock exchanges would inform depositories to initiate the freezing of promoters’ demat accounts under the prescribed standard operating procedure.
The regulator has also proposed restricting companies from terminating an existing monitoring agency’s agreement or appointing a new agency while a reported non-cooperation status remains unresolved. The restriction would continue until the company rectifies the issue and the existing agency submits a complete report for the relevant period.
Fee Disputes Excluded From Non-Cooperation
Sebi has clarified that non-payment of monitoring agency fees would not, by itself, constitute non-cooperation. Agencies may instead include contractual provisions requiring companies to pay the entire monitoring fee in advance.
If an agreement ends before the issue proceeds are fully utilised, an agency that received the entire fee upfront may have to refund the proportionate amount for the remaining monitoring period.
The proposals also seek to align the LODR Regulations with the Issue of Capital and Disclosure Requirements (ICDR) Regulations, streamline reporting requirements and revise the monitoring agency report format. A separate Regulation 32A has been proposed to deal specifically with monitoring agency reports.
Public comments on the proposals are open until November 3, 2026. The changes are proposals and have not yet been finalised.
