SEBI consults on monitoring how companies use funds raised from investors
SEBI is seeking comments on changes to the monitoring and disclosure of issue proceeds—the money a company raises through an issue of securities. The paper concerns the equity fundraising framework under the Issue of Capital and Disclosure Requirements Regulations and the continuing obligations of listed companies under the Listing Obligations and Disclosure Requirements Regulations.
The working group recommends appointing a monitoring agency irrespective of issue size, excluding the offer-for-sale component, which represents shares sold by existing shareholders. Monitoring agencies would submit reports directly to stock exchanges and identify instances in which an issuer fails to provide the information needed to check utilisation. Proposed exchange action includes a Rs. 50,000 fine per reported instance of non-cooperation. SEBI also proposes that a company should not change its monitoring agency while an identified non-cooperation issue remains unresolved.
These are consultation proposals. For boards and audit committees, the underlying concern is the reliability of the evidence showing that funds have been used for the purposes communicated to investors. The review should cover supporting records, deviations and timely escalation of information gaps.
