Description

BSE circular specifying interim framework allowing Investment Advisers and Research Analysts to communicate certified past performance data to clients on request, prior to operationalisation of Past Risk and Return Verification Agency (PaRRVA).

Summary

SEBI has introduced an interim arrangement allowing Investment Advisers (IAs) and Research Analysts (RAs) to communicate certified past performance data to clients for the period prior to operationalisation of the Past Risk and Return Verification Agency (PaRRVA). This follows representations from industry associations requesting facilitation of past performance communication. The arrangement permits IAs/RAs to provide past performance data certified by ICAI/ICMAI members to clients on specific request only, subject to strict conditions and disclaimers.

Key Points

  • IAs/RAs may provide past performance data certified by ICAI/ICMAI members to clients only on specific client request
  • Past performance data must be communicated on one-to-one basis only, not through public media or websites
  • IAs/RAs wishing to communicate certified past performance must enrol with PaRRVA within three months of its operationalisation
  • Applicable period for such past performance data is only prior to PaRRVA operationalisation date
  • Performance data post-PaRRVA operationalisation must only use PaRRVA-verified risk and return metrics
  • Mandatory disclaimer required with all past performance communications
  • After two years from PaRRVA operationalisation, only PaRRVA-verified metrics permitted
  • IAASB/RAASB directed to specify communication templates within one month in consultation with Industry Standard Forums and SEBI

Regulatory Changes

This circular establishes a new interim framework for IAs and RAs to communicate past performance:

Permitted Actions:

  • Communication of past performance data certified by ICAI/ICMAI members to clients on specific request
  • Data pertaining to period prior to PaRRVA operationalisation only

Restrictions:

  • No public disclosure through websites, public media, or any other mode
  • Only one-to-one communication with clients (including prospective clients) allowed
  • Must be accompanied by prescribed disclaimer

Two-Tier Timeline:

  1. Interim period: Until two years from PaRRVA operationalisation - certified past performance allowed with restrictions
  2. Post two years: Only PaRRVA-verified metrics permitted; no communication of pre-PaRRVA period data

Compliance Requirements

For Investment Advisers and Research Analysts:

  1. Certification Requirement: Past performance data must be certified by member of ICAI (Institute of Chartered Accountants of India) or ICMAI (Institute of Cost Accountants of India)

  2. Client Request: Communicate past performance only upon specific request from client or prospective client

  3. Communication Method: Strictly one-to-one basis; no public dissemination through websites or public media

  4. Mandatory Disclaimer: Include the following disclaimer with all communications: “The performance data presented herein are not verified by Past Risk and Return Verification Agency (PaRRVA) or any other agency recognized by SEBI for this purpose. The performance data presented herein may not be comparable to performance data of any other IA/RA. Computation of the performance may vary across the industry. Users are requested to apply their due diligence before making investment decisions on the basis of the given past performance data. Past performance is no guarantee of future results. Investment in securities is subject to market risk. Registration with SEBI or enlistment with IAASB or RAASB (as the case may be) is not a guarantee or assurance of future returns.”

  5. PaRRVA Enrollment: IAs/RAs must enrol with PaRRVA within three months of its operationalisation if they wish to continue communicating certified past performance data beyond three months

  6. Template Compliance: Follow templates to be specified by IAASB/RAASB within one month of circular date

  7. Post-Operationalisation Performance: For period after PaRRVA operationalisation, only advertise or provide performance data verified by PaRRVA

For IAASB/RAASB:

  • Specify templates for communicating certified past performance data within one month
  • Consultation required with Industry Standard Forums for IAs and RAs, and SEBI

Enforcement: Contravention of circular provisions will result in enforcement actions

Important Dates

  • October 30, 2025: Date of circular issuance
  • Within one month from October 30, 2025: IAASB/RAASB to specify communication templates
  • Within three months of PaRRVA operationalisation: Deadline for IAs/RAs to enrol with PaRRVA (if they wish to communicate certified past performance)
  • Date of PaRRVA operationalisation: Cut-off date for past performance data coverage under interim arrangement
  • Two years from PaRRVA operationalisation: End of interim arrangement; only PaRRVA-verified metrics permitted thereafter

Impact Assessment

Market Impact:

  • Enables Investment Advisers and Research Analysts to demonstrate track record during interim period before PaRRVA becomes fully operational
  • Addresses industry demand for performance disclosure while maintaining regulatory oversight
  • Creates level playing field by establishing standardized certification and disclosure requirements

Operational Impact:

  • IAs/RAs need to engage ICAI/ICMAI members for certification of past performance data
  • Systems and processes required for one-to-one client communication (no public disclosure)
  • Compliance infrastructure needed for mandatory disclaimer inclusion
  • Decision point for IAs/RAs on whether to enrol with PaRRVA within three-month window
  • Template compliance once IAASB/RAASB specifications are released

Compliance Impact:

  • High compliance burden with strict conditions on communication method, certification, and disclaimers
  • Mandatory enrollment with PaRRVA creates timeline pressure for IAs/RAs wishing to continue performance disclosure
  • Risk of enforcement action for non-compliance including public disclosure violations
  • Two-year sunset provision requires transition planning to PaRRVA-only metrics

Stakeholder Impact:

  • Investment Advisers/Research Analysts: Opportunity to communicate track record but with significant compliance requirements
  • Clients: Access to certified past performance data on request, with appropriate disclaimers
  • IAASB/RAASB: Responsibility to develop templates in consultation with industry within tight timeline
  • ICAI/ICMAI Members: New certification service opportunity for IAs/RAs

Impact Justification

High importance for Investment Advisers and Research Analysts as it enables them to communicate past performance to clients during interim period. Establishes strict conditions and timelines for compliance including mandatory PaRRVA enrollment within three months of operationalisation.