SEBI issued a circular initiating the recognition and operationalisation of the Past Risk and Return Verification Agency (“PaRRVA”) under the SEBI (Intermediaries) Regulations, 2008 (“Circular”). PaRRVA will serve as an independent verifier of risk and return metrics used by regulated entities in their public claims. Through this Circular, SEBI has formalised the role of PaRRVA and laid the foundation for its operational ecosystem.
Credit Rating Agencies (“CRAs”) may now be recognised as PaRRVA. Recognised stock exchanges will function as the PaRRVA Data Centre (“PDCs”). PaRRVA and PDCs shall operate under a principal-agent model. PaRRVA will rely on PDCs for technological and operational support in verifying data. However, PaRRVA shall be responsible for the verification work.
The Circular stipulates stringent eligibility norms for recognition as PaRRVA. CRA must have at least 15 years of operational history, a net worth of ₹100 crore or more, and a strong track record. Additionally, a robust investor grievance redressal mechanism, including Online Dispute Resolution (“ODR”), is mandatory. Similarly, a PDC must have a minimum of 15 years of existence, a net worth of ₹200 crore with nationwide terminals.
Recognition of a CRA as PaRRVA will follow a two-stage process: an in-principle approval and final recognition, with specific requirements for each.
Further, a two-month pilot phase for PaRRVA operations is required, during which the verification services will be tested and refined. Verified metrics will not be publicly disseminated during this period. Upon feedback and review by an oversight committee, PaRRVA may be fully operationalised post-pilot.
Verification methodology is to be developed by the CRA and implemented via the PDC. PaRRVA is required to constitute an oversight committee within two months of receiving in-principle approval. This committee shall include representatives from PaRRVA, PDC and SEBI-recognised investor association. The operational framework is designed to evolve with experience and stakeholder feedback. PaRRVA may propose modifications to verification criteria, permissible claims, and presentation standards, subject to consultation with the Industry Standards Forum and SEBI’s approval.
Under the PaRRVA–PDC model, PaRRVA will manage the verification process, while the PDC will collect and store data from MIIS, AMFI, and other regulated entities. Investment Advisers (IAs) and Research Analysts (RAs) will submit their recommendations to the PDC either in real-time or at the end of the trading day, depending on the nature of the advice. The PDC will process this data and forward the verified output. PaRRVA will publish it with required disclosures and disclaimers.
SEBI has set clear rules for presenting verified metrics. Selective or misleading displays are not allowed. Any claim must include comprehensive data, such as the total number of portfolios or algorithms reviewed, and present a balanced view of positive and negative outcomes. References to individual stock or derivative performance must be contextualised with aggregate performance data and risk indicators.
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