India First: Investment Performance Verification Framework

Mumbai, Dec 8 (PTI) India has become the first country to have a standard framework for investment performance verification, which will help investors take informed decisions.

Capital markets regulator Sebi Chairman Tuhin Kanta Pandey on Monday launched the pilot project of the platform christened 'Past Risk and Return Verification Agency (PaRRVA)', which has been developed, along with domestic rating agency CareEdge Ratings and the NSE.

Several international jurisdictions recognise the risks of unverified performance claims in securities markets. However, we have taken the lead to establish an independent mechanism to validate these claims," Pandey said at the launch.

He explained that Sebi-registered intermediaries such as stock brokers, investment advisors and registered analysts cannot refer to past performance, making it difficult to establish their credentials, while the unregistered entities have a field day making false claims.

The PaRRVA introduces a mechanism for Sebi-registered intermediaries to showcase verified past returns to investors, he said, adding that the platform was developed because investors deserve performance numbers they can trust.

The framework connects a Sebi-registered CRA acting as PaRRVA with a recognised stock exchange serving as the PaRRVA Data Centre (PDC), he said, adding that these two will independently verify past returns using a transparent and standardised methodology.

The verified performance shall be for specified periods and arbitrary selection of dates or time periods to present favourable outcome will not be permitted, the Sebi chief said, adding that there will be an oversight committee monitoring the PaRRVA and PDC.

Initially, PaRRVA is being operationalised for Sebi-registered investment aAvisers, research analysts, and stock brokers who provide algorithmic trading services, Pandey said.

Mehul Pandya, Group Chief Executive and Managing Director of CareEdge Ratings, said the CRA sees a revenue opportunity in the platform going ahead, and added that it has been working for nearly a year on it along with other stakeholders.