Source: TOI
Context:
The Securities and Exchange Board of India (SEBI) has granted interim relief to Investment Advisers (IAs) and Research Analysts (RAs), allowing them to share their past performance data with clients until the Past Risk and Return Verification Agency (PaRRVA) becomes operational.
Investment Advisers (IAs)
- Investment Advisers are individuals or firms registered with the Securities and Exchange Board of India (SEBI) who provide personalized financial advice to clients about investments in securities or financial products.
- Regulation:
Governed by the SEBI (Investment Advisers) Regulations, 2013. - Role and Functions:
- Offer advice tailored to the client’s financial goals, risk appetite, and investment horizon.
- Prepare and share financial plans, asset allocation strategies, and investment recommendations.
- Must disclose conflicts of interest and avoid product-based commissions (fee-only advisory model).
- Eligibility Criteria:
- Must have specific qualifications and certifications (such as NISM-Series-X-A & B).
- Must be registered with SEBI before providing advice.
Research Analysts (RAs)
- Research Analysts are individuals or entities that analyze securities or sectors and publish research reports or recommendations for investors.
- Regulation:
Governed by the SEBI (Research Analysts) Regulations, 2014. - Role and Functions:
- Conduct research and analysis on listed companies, sectors, or financial instruments.
- Provide investment opinions, price targets, and buy/sell/hold recommendations.
- Ensure that research is independent, data-driven, and free from conflict of interest.
- Eligibility Criteria:
- Must have relevant qualifications (finance, commerce, economics, etc.) and NISM certification.
- Must maintain transparency and record-keeping for published research.
Interim Permission Before PaRRVA Launch
- SEBI has allowed IAs and RAs to share verified past performance records with clients on a one-to-one basis.
- This data must be verified by a Chartered Accountant (CA) or a Chartered Management Accountant (CMA).
- The data can only be shared upon specific client request, not publicly through websites, social media, or advertisements.
Creation of PaRRVA
- In April 2025, SEBI approved a framework to create PaRRVA to standardize and verify the risk and return metrics of IAs and RAs.
- PaRRVA will operate prospectively, meaning it will verify performance after IAs/RAs are onboarded with the agency.
- The system aims to enhance transparency and investor trust, while curbing misleading performance claims.
SEBI’s Conditional Relief
- Advisers sharing past performance data must register with PaRRVA within three months of its launch.
- Failure to enrol within this timeline will bar them from sharing any performance data.
- The shared data must include a disclaimer specifying that it was verified by a CA/CMA and not by PaRRVA.
- Once PaRRVA becomes operational, only PaRRVA-verified data can be used for client communication or advertising.
