📢 When the Monitoring Agency Stops Reporting to You, and Starts Reporting on You

Today, the monitoring agency reports to the issuer, the Audit Committee reviews it, and the company files it with the exchanges. SEBI's consultation paper of October 13, 2026 proposes to take the issuer out of that chain.

𝗧𝗵𝗲 𝗕𝗮𝗰𝗸𝗴𝗿𝗼𝘂𝗻𝗱:

The LODR Working Group (chaired by Shri V S Sundaresan) found that some listed entities withheld or delayed information to monitoring agencies or delayed filing their reports. Investors were left without an answer to one basic question: was the money used as promised?

𝗪𝗵𝗮𝘁 𝗦𝗘𝗕𝗜 𝗣𝗿𝗼𝗽𝗼𝘀𝗲𝘀:

1️⃣ Monitoring agency for every issuance, irrespective of size (excluding OFS). Today the trigger is ₹100 crore, or ₹50 crore for SME IPOs.

2️⃣ The agency reports directly to the exchanges. If the company does not cooperate, it reports on "best available information" with a "Statement of non-cooperation", displayed prominently on exchange websites.

3️⃣ A fine of ₹50,000 per instance. If unresolved 15 days after the exchange's notice, a notice to promoters. Ten days after that, a freeze of their demat accounts.

4️⃣ No change of agency while non-cooperation remains unrectified. Non-payment of fees alone is not "non-cooperation".

5️⃣ A new Regulation 32A for agency reports. Regulation 32 to cover the statement of utilisation for exempt entities.

𝗠𝘆 𝗧𝗮𝗸𝗲:

The real shift is not the fine. It is who controls the narrative. Today, management sees the findings first. Under the proposal, the report reaches the market whether or not the company has engaged with it.

Questions worth raising in comments:

🔹 Should a small preferential allotment bear the cost of a monitoring agency?

🔹 With mandatory appointment for all, who exactly remains "exempt"?

🔹 What counts as an "instance" of non-cooperation?

🔹 How does the demat freeze work where there is no identifiable promoter?

𝗔𝗰𝘁𝗶𝗼𝗻 𝗣𝗼𝗶𝗻𝘁𝘀 (𝗽𝗿𝗲𝗽𝗮𝗿𝗮𝘁𝗼𝗿𝘆, 𝗻𝗼𝘁 𝘆𝗲𝘁 𝗹𝗮𝘄):

✅ Reconcile use of proceeds against stated objects every quarter.

✅ Assign one owner for agency information requests.

✅ Review monitoring agency agreements.

✅ Make the Audit Committee's Regulation 32(7) review substantive.

𝗞𝗲𝘆 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆:

Fund utilisation has always been a disclosure obligation. This proposal would make it a test of promoter accountability.

Where should SEBI draw the line between investor protection and proportionality for small issues?

Comments are due by November 03, 2026.

🔗 Link: https://www.sebi.gov.in/reports-and-statistics/reports/oct-2026/consultation-paper-on-recommendations-of-the-working-group-for-review-of-sebi-lodr-regulations-2015-review-of-framework-for-monitoring-and-disclosure-of-utilization-of-issue-proceeds_105242.html