The regulator is set to tighten the noose around post-IPO fund utilization. SEBI’s new consultation paper proposes a ₹50,000 fine for every instance of non-cooperation reported by monitoring agencies in a given quarter. This isn't a one-time penalty; it’s a graduated escalation. If a company ignores the fine or fails to rectify the issue, the clock starts ticking on promoter accounts.
The enforcement ladder is blunt. Exchanges must review compliance within 30 days of the due date. If the company doesn’t pay the fine within 15 days of the notice, the problem moves up the chain. Notices go to promoters. Ten days after that promoter notice, if the issue remains unresolved, depositories would be informed to initiate the freezing of promoters’ demat accounts. It’s a move to ensure that the people who raised the money can’t walk away from the utilization details.
Monitoring agencies get a new direct line to the stock exchanges. Under the proposed framework, if a company withholds information or delays submissions, the agency can file a report based on the best available information, accompanied by a statement of non-cooperation. Exchanges would then prominently display these reports on their websites. The goal is transparency for investors who often have no idea where their IPO money actually went after the listing bell rings.
There are operational tweaks too. SEBI proposes making the appointment of a monitoring agency mandatory for all issuances, regardless of size, excluding the offer-for-sale component. The regulator also wants to align the ICDR Regulations with the LODR framework to remove inconsistencies. This includes removing the phrase “on a quarterly basis” from specified provisions to streamline reporting timelines for mainboard IPOs, rights issues, and SME IPOs.
Fee disputes won't trigger the non-cooperation tag. SEBI clarifies that non-payment of fees to a monitoring agency is not, by itself, non-cooperation. Instead, agencies can include contractual provisions requiring full fees upfront. If the agreement is terminated early, the agency must refund the proportionate fee for the remaining period. The proposals are open for public comments until November 3.