SEBI Proposes Issue Proceeds Monitoring Reforms

SEBI Proposes Tighter Tracking of IPO Proceeds

SEBI has issued a consultation paper proposing enhanced monitoring mechanisms for the utilisation of funds raised through public and private placements. The proposals include mandatory reporting by monitoring agencies, direct reporting to SEBI, and penalties for failure to cooperate.

Currently, use-of-proceeds reporting is filed by issuers through lead managers. The new framework mandates an independent monitoring agency (typically auditors or financial institutions) to verify allocation and impose reporting duties directly on such agencies. Non-compliance or obstructive behaviour by sponsors, directors, or auditors may attract fines up to ₹1 crore.

SEBI also proposes realigning certain disclosure norms under LODR with ICDR regulations to ensure consistency across listing and issuance obligations. The reforms are aimed at improving investor confidence, particularly in SME and main-board issuances where diversion of funds has been a concern.

Practitioners must now anticipate greater third-party scrutiny in post-IPO compliance. Legal advice will increasingly involve structuring monitoring agency appointments and managing audit coordination. The proposals, if adopted, may delay fund deployment but enhance transparency.