Market regulator Sebi issues framework for return verification agency

Agency will verify the claims made by investment advisors, research analysts, and algo providers

The Securities and Exchange Board of India (Sebi) on Friday issued the framework for registration as Past Risk and Return Verification Agency (PaRRVA), a body that will verify claims on performance by investment advisors, research analysts, and algo providers.

 

The market regulator had approved the formation of such a validation agency in its December 2024 board meeting. Sebi has also issued the guidelines on functioning of the verification body.

 

A credit rating agency (CRA) will be recognised as the PaRRVA, while a stock exchange will be assigned as the data centre. To be eligible to act as PaRRVA, the rating agency must have been in existence for 15 years, have a net worth of Rs 100 crore, and at least 250 issuers should have obtained ratings for debt securities.

 

 

CRAs would have to apply to Sebi for recognition and enter into an agreement with the stock exchange acting as the data centre. Following in-principle approval, the CRA would have to develop the infrastructure within three months.

 

The PaRRVA will be responsible for defining the methodology for computing risk–return metrics and formulating the verification process.

 

The market regulator has prohibited selective display of verified returns of any specific product or service. It adds that advisors or algo providers cannot select arbitrary dates and time periods to present favourable outcomes or make claims based on selective presentation of risk–return metrics.

 

“All claim statements, whether electronic or physical, of regulated persons must contain a link/QR code providing details of the overall summary of risk–return metrics on the website of PaRRVA,” said Sebi. 

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