Investment advisers can advertise their performance

SEBI has allowed registered investment advisers (RIAs) to advertise their past performance. However, they will have to validate their past performance through the SEBI recognised Past Risk and Return Verification Agency (PaRRVA), a credit rating like agency for RIAs.

So far, RIAs were prohibited from making a reference to their past performance in their advertisements.

In its circular, SEBI said, “In order to enable IAs and RAs to avail the services of PaRRVA and make claims in their advertisements using risk-return metrics verified by PaRRVA, it has been decided to amend the above-mentioned clauses of the Master Circular for IAs and RAs. Accordingly, the paragraph 10.1(c)(xii) of the Master Circular for Investment Advisers dated May 21, 2024, stands amended as under:

Reference to past performance or risk-return metrics in respect of the services of Investment Adviser unless such risk-return metrics are verified by Past Risk and Return Verification Agency (PaRRVA) and claims using such metrics are made in the manner specified by SEBI.”

In the meantime, SEBI has issued operational guidelines to become PaRRVA. According to SEBI norms, Credit Rating Agencies (CRAs) can become PaRRVA.

For this, the CRAs must be in existence for at least 15 years, have a net worth of over Rs. 100 crores, have over 250 issuers who have obtained ratings of listed or proposed to be listed debt securities and have an online investor grievance redressal mechanism.