‘SEBI mulls 3rd-party monitoring of IPO fund use’

Mumbai Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey has outlined measures to strengthen oversight of listed companies and capital raising, warning that entities with little or no economic activity can increase risks in the market. Speaking during a panel discussion, Pandey said the regulator was preparing a framework under which third-party monitoring agencies would verify whether companies used funds raised through initial public offerings (IPOs) for the purposes disclosed in their offer documents. He stressed that companies raising money from the public must remain accountable for its utilisation. SEBI is also reviewing the framework governing debenture trustees to strengthen oversight and improve monitoring of corporate debt-related disclosures. Earlier this month, the regulator issued a consultation paper proposing that monitoring agencies be made mandatory for all public issues, irrespective of size, excluding the offer-for-sale component. Currently, monitoring by a SEBI-registered credit rating agency is required when the fresh issue size exceeds Rs 100 crore. Under the proposed framework, stock exchanges could impose a fine of Rs 50,000 for every reported instance of a company's failure to cooperate with a monitoring agency. Continued non-compliance could result in depositories freezing promoters' demat accounts. Companies reported for non-cooperation would not be allowed to terminate an agency's agreement or appoint a replacement until the default was resolved. The proposals remain under public consultation and have not yet become rules. SEBI is also considering changes to the main-board IPO and follow-on public offer frameworks, alongside a review of listing and disclosure obligations. The SME IPO framework and Innovators Growth Platform are also under review to improve access to public capital for growing businesses.