Sebi Allows Investment Advisers to Share Past Performance Data Temporarily

The Securities and Exchange Board of India (Sebi) has provided interim relief to investment advisers (IAs) and research advisers (RAs) by allowing them to share their past performance data. This facility will be available until the Past Risk and Return Verification Agency (PaRRVA) is established and becomes operational. The shared performance data must have been verified by a chartered accountant or a chartered management accountant, and it can only be provided to clients, including prospective ones, on a one-to-one basis upon their specific request. This information should not be made public through websites or other general media. Sebi had earlier specified a framework for PaRRVA to address the demand from IAs and RAs to display their performance. PaRRVA will conduct verification prospectively for periods after an adviser is onboarded with the agency. Advisers who wish to share past performance data must enroll with PaRRVA within three months of its operationalization. Performance data for periods subsequent to PaRRVA's operationalization must use metrics verified by PaRRVA. Any communication of past performance must include a disclaimer regarding the data's nature and the verifying agency.

Impact This decision offers a crucial window for investment and research advisers to demonstrate their capabilities to potential clients using historical data, which can significantly aid in business development. For investors, it provides an opportunity to assess advisers' track records before engagement, albeit on a limited, requested basis. The interim measure, pending the formal PaRRVA verification system, strikes a balance between industry demands and regulatory oversight. Impact rating: 7/10.

Difficult Terms: Sebi: Securities and Exchange Board of India. The primary regulator of the securities market in India. Investment Advisers (IAs): Individuals or entities providing investment advice to clients for a fee. Research Advisers (RAs): Individuals or entities providing research recommendations or analysis on securities. Past Risk and Return Verification Agency (PaRRVA): A proposed agency to verify and validate the past risk and return performance of investment and research advisers. Chartered Accountant: A professional accountant qualified to conduct audits, manage accounting, and provide financial advice. Chartered Management Accountant: A professional accountant focusing on management accounting, strategic planning, and financial decision-making within organizations.