SEBI Proposes Mandatory Monitoring Agencies for Public Issues, Rs. 50,000 Fine for Non-Cooperation
Introduction
The Securities and Exchange Board of India (SEBI) has proposed stricter rules to monitor how listed companies utilise funds raised through public issues. The proposals include mandatory monitoring agencies for all public issues, a Rs. 50,000 fine for each instance of non-cooperation, and the possible freezing of promoters’ demat accounts in cases of continued non-compliance.
Announced on October 13, 2026, the proposals are part of a review of SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. For investors exploring the top 5 apps for stock trading in India, the proposed changes highlight the importance of transparency and accountability in the securities market. The regulator has invited public comments on the proposals until November 3, 2026.
SEBI Proposes Mandatory Monitoring Agencies for All Public Issues
Under the proposed framework, listed companies would be required to appoint a monitoring agency for every public issue, regardless of the issue size. The offer-for-sale (OFS) component would be excluded when determining the applicable issue size.
Monitoring agencies independently track the utilisation of funds raised and help establish whether the proceeds are being used for the purposes stated in the offer documents. Making their appointment mandatory could extend this oversight to a wider range of public issues.
Direct Reporting to Stock Exchanges
SEBI has proposed allowing monitoring agencies to submit their reports directly to stock exchanges when listed companies fail to cooperate during the monitoring process.
In such cases, agencies could prepare reports using the best available information and attach a statement highlighting the company’s non-cooperation. If the company subsequently provides the required information, the agency would have to submit a complete report within 15 days of receiving it.
Stock exchanges would also be required to display monitoring reports and statements of non-cooperation prominently on their websites. These disclosures could help investors identify instances where companies have not provided adequate information about the utilisation of issue proceeds.
Rs. 50,000 Fine and Graded Enforcement Mechanism
The proposed framework introduces financial penalties and escalating enforcement measures for companies that fail to cooperate.
Under the proposal, stock exchanges would impose a penalty of Rs. 50,000 for every reported instance in which a listed company fails to cooperate with its monitoring agency during the applicable quarterly or half-yearly reporting period. Exchanges would issue notices to non-compliant companies within 30 days of the due date for submitting the monitoring report.
If the company fails to resolve the issue, further notices would be issued to its promoters. Under the proposal, if the matter remains unresolved for 10 days after the promoter notice, stock exchanges would inform depositories to initiate the freezing of promoters’ demat accounts under the applicable standard operating procedures.
SEBI has also proposed preventing companies from terminating an existing monitoring agency’s agreement or appointing a replacement while the reported non-cooperation remains unresolved.
Other Proposed Changes to Monitoring Rules
The consultation paper also addresses monitoring fees and reporting requirements. Non-payment of fees to a monitoring agency, by itself, would not qualify as non-cooperation. The proposals also cover advance fee arrangements and the possible refund of proportionate fees when an agreement ends before the monitoring period is complete.
Additionally, SEBI has proposed aligning the Issue of Capital and Disclosure Requirements (ICDR) Regulations with the LODR framework. Other changes include revising monitoring agency report formats, clarifying the monitoring of gross issue proceeds and introducing a separate Regulation 32A for monitoring agency reports.
Investors comparing a free demat account with no annual charges should also understand that account fees and regulatory safeguards serve different purposes. The proposed rules focus on the accountability of companies raising public money rather than the charges associated with individual investment accounts.
What Happens Next?
The proposals remain under consultation and are not yet finalised. SEBI will consider feedback received by November 3, 2026, before determining the next steps.
If implemented, the measures could strengthen oversight of public issue proceeds and establish clearer consequences for companies that do not cooperate with monitoring agencies. Investors evaluating the best mobile app for managing demat accounts can also consider the availability of disclosures, portfolio information and relevant market updates when assessing investment platforms.
Frequently Asked Questions
What has SEBI proposed for monitoring public issues?
SEBI has proposed making the appointment of a monitoring agency mandatory for all public issues, irrespective of issue size, excluding the offer-for-sale component.
What is the proposed fine for non-cooperation with monitoring agencies?
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.
Can promoters’ demat accounts be frozen under the proposed rules?
Yes. If a company fails to resolve the reported non-cooperation, stock exchanges could initiate the process of freezing promoters’ demat accounts after the prescribed notices and waiting period.
What is the deadline for submitting public comments on SEBI’s proposals?
The regulator is accepting feedback from the public on these proposed amendments until November 3, 2026.
Have SEBI’s proposed monitoring rules come into effect?
No. The changes are proposals under consultation and have not yet been finalised. Their implementation will depend on SEBI’s subsequent regulatory decisions.
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