SEBI-registered entities will have to get past return claims PaRRVA-verified: Chairman TK Pandey

SEBI Chairman Tuhin Kanta Pandey said on Monday that it will soon be mandatory for registered entities to get their past return claims verified by the Past Risk and Return Verification Agency (PaRRVA). Earlier, the market regulator launched a dedicated agency, called PaRRVA, to verify financial service providers' performance claims. The agency will verify performance claims by a host of market entities, including investment advisors, research analysts and algo providers.

Initially, PaRRVA will be available for SEBI-registered investment advisers (IA), research analysts (RA) and registered intermediaries.

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Under the PaRRVA framework, a credit rating agency (CRA) will be recognised as PaRRVA while a stock exchange will be assigned as the data centre. In order to be recognised as eligible to act as PaRRVA, the rating agency must fulfil certain conditions, such as 15 years of existence, a net worth of Rs 100 crore, and debt security ratings for at least 250 issuers.

PaRRVA will be required to verify any performance claim that a SEBI-registered entity plans to advertise. Only claims validated by the agency will be allowed to be advertised, according to the regulator.

Technically an optional tool for registered entities, the mandatory requirement to validate promotions is set to make PaRRVA a mandatory tool in practice.

Algo strategies to be monitored in real time through PaRRVA

Market participants will be able to verify any algo claiming a particular level of returns on the PaRRVA platform. In other words, algo strategies will also face real-time monitoring through PaRRVA.

This move is set to make the advertisements more transparent and trustworthy, giving investors the confidence that any claim or promotion is verified using a trustworthy agency. It will also enable investors to check the truthfulness of algo performance claims. SEBI approved the establishment of such a validation agency in December last year. The capital market regulator has already issued guidelines on the verification body's functioning.