Capital markets regulator Securities and Exchange Board of India (SEBI) has proposed to make it mandatory for companies to appoint a monitoring agency for all public issues irrespective of its size to check the possible misuse of money.
Currently, the appointment of a monitoring agency is mandatory only if the issue size, say a rights issue or an initial public offer (IPO), exceeds Rs 500 crore.
As per the new proposal, SEBI has also said the issue utilisation report needs to be submitted within 45 days of the end of every quarter against the current norm of half yearly reports. It has also sought public disclosure of these reports, a provision which is absent as of now but many firms do disclose it.
The securities market regulator also proposed a specific guideline to monitor the deviation in the utilisation of the proceeds of the issue.
These proposals follow a move sometime back when SEBI limited the portion of money from such public issues which can be spent on ‘General Corporate Purpose’. Under this head firms do not disclose the particular use of the money there are raising. SEBI had limited the amount of money raised through a public issue going under this head to 25 per cent or one-fourth of the overall issue. This gave better visibility to public investors on what the money will be spent on.
SEBI also suggested companies to constitute a committee of board of directors to oversee the monitoring of utilisation of issue proceeds before the opening of the issue. SEBI has invited comments for these proposals on or before March 25, 2014.
(Edited by Joby Puthuparampil Johnson)