Description

BSE circular on interim arrangement allowing IAs and RAs to communicate certified past performance data to clients on request before Past Risk and Return Verification Agency (PaRRVA) becomes operational.

Summary

SEBI has introduced an interim arrangement allowing Investment Advisers (IAs) and Research Analysts (RAs) to communicate certified past performance data to clients prior to the operationalisation of the Past Risk and Return Verification Agency (PaRRVA). The arrangement permits sharing of ICAI/ICMAI certified past performance data on a one-to-one basis upon specific client request, subject to mandatory enrollment with PaRRVA within three months of its launch and inclusion of prescribed disclaimers.

Key Points

  • IAs/RAs may provide past performance data certified by ICAI/ICMAI members to clients only on specific request
  • Past performance data must be communicated on one-to-one basis only, not through public media or websites
  • IAs/RAs must enrol with PaRRVA within three months of its operationalisation to continue sharing certified past performance
  • Performance data applies only to period before PaRRVA operationalisation; post-operationalisation data must be PaRRVA-verified
  • Mandatory disclaimer must accompany all communications of past performance data
  • After two years from PaRRVA operationalisation, only PaRRVA-verified metrics can be used
  • IAASB/RAASB to specify templates for certified past performance communication within one month

Regulatory Changes

This circular implements an interim framework based on SEBI’s April 4, 2025 circular on PaRRVA and industry representations. Key regulatory provisions:

  • Certification Requirement: Past performance must be certified by members of ICAI (Institute of Chartered Accountants of India) or ICMAI (Institute of Cost Accountants of India)
  • Communication Restrictions: Data can only be shared upon specific client request, on one-to-one basis, not via public channels
  • Transition Period: Two-year sunset clause after PaRRVA operationalisation for pre-PaRRVA performance data
  • Enforcement: Contraventions subject to enforcement actions including summary proceedings

Compliance Requirements

For Investment Advisers and Research Analysts:

  1. Obtain certification of past performance data from ICAI/ICMAI member
  2. Share data only upon specific client request (including prospective clients)
  3. Communicate on strictly one-to-one basis - no public disclosure via websites or media
  4. Include mandatory 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. Enrol with PaRRVA within three months of its operationalisation (failure results in loss of ability to communicate certified past performance)
  6. Use only PaRRVA-verified metrics for performance post-PaRRVA operationalisation date
  7. Follow templates specified by IAASB/RAASB for communication format

For IAASB/RAASB:

  1. Specify templates for certified past performance communication within one month of circular date
  2. Consult with Industry Standard Forums for IAs and RAs and SEBI on template development

Important Dates

  • October 30, 2025: Circular issue date
  • Within one month from October 30, 2025: IAASB/RAASB to specify communication templates
  • Within three months of PaRRVA operationalisation: IAs/RAs must enrol with PaRRVA to continue sharing certified past performance
  • Two years after PaRRVA operationalisation: Complete transition - only PaRRVA-verified metrics permitted, pre-PaRRVA data cannot be used
  • Date of PaRRVA operationalisation: Cutoff date - performance before this uses interim arrangement, performance after requires PaRRVA verification

Impact Assessment

Market Impact:

  • Enables IAs and RAs to demonstrate track record to prospective clients during PaRRVA transition period
  • Creates standardized approach to past performance disclosure with mandatory certification and disclaimer requirements
  • Levels playing field while ensuring investor protection through mandatory disclosures

Operational Impact:

  • IAs/RAs need to engage ICAI/ICMAI members for certification of historical performance data
  • Requires establishing systems for one-to-one client communication (cannot use existing public marketing materials)
  • Three-month enrollment window creates urgency for IAs/RAs to register with PaRRVA upon launch
  • Two-year sunset clause requires dual performance reporting systems during transition
  • IAASB/RAASB must quickly develop and publish standardized templates for industry adoption

Compliance Impact:

  • Strict conditions on communication method (one-to-one only) require process changes
  • Mandatory disclaimer must be incorporated into all client communications
  • Non-compliance subjects entities to SEBI enforcement actions
  • Template compliance required once IAASB/RAASB specifications published

Impact Justification

Provides interim framework for IAs and RAs to share past performance data with specific clients before PaRRVA operationalisation, with strict conditions and mandatory disclaimer requirements.