Description

SEBI allows Investment Advisers and Research Analysts to provide certified past performance data to clients on request before PaRRVA becomes operational, subject to specific conditions and disclaimers.

Summary

BSE has issued guidelines allowing Investment Advisers (IAs) and Research Analysts (RAs) to communicate certified past performance data to clients on a one-to-one basis prior to the operationalization of the Past Risk and Return Verification Agency (PaRRVA). This interim arrangement requires certification by ICAI/ICMAI members, enrollment with PaRRVA within three months of its launch, and use of mandatory disclaimers. The arrangement will sunset two years after PaRRVA becomes operational.

Key Points

  • IAs and RAs may provide past performance data certified by ICAI/ICMAI members to clients only upon specific request
  • Past performance data must be communicated on a one-to-one basis and cannot be made public through websites or media
  • IAs/RAs must enroll with PaRRVA within three months of its operationalization to continue sharing certified past performance
  • Certified past performance is only for periods prior to PaRRVA operationalization
  • Post-PaRRVA launch, only PaRRVA-verified metrics can be used for subsequent periods
  • Mandatory disclaimer must accompany all past performance communications
  • After two years from PaRRVA operationalization, only PaRRVA-verified data can be used
  • IAASB/RAASB must specify communication templates within one month

Regulatory Changes

SEBI introduced this interim framework following representations from industry associations requesting the ability to communicate past performance data before PaRRVA becomes operational. The framework balances investor protection with business facilitation by:

  • Requiring professional certification (ICAI/ICMAI) of past performance data
  • Limiting disclosure to specific client requests rather than public advertising
  • Mandating enrollment with PaRRVA as a condition for using certified past performance
  • Establishing clear sunset provisions (two years post-PaRRVA) for pre-PaRRVA performance data
  • Requiring standardized disclaimers about non-verification and comparability limitations

Compliance Requirements

For Investment Advisers and Research Analysts:

  1. Obtain certification of past performance data from ICAI or ICMAI members before sharing with clients
  2. Provide certified past performance only upon specific client request (including prospective clients)
  3. Communicate data only on one-to-one basis - no public disclosure via websites, media, or other channels
  4. Enroll with PaRRVA within three months of its operationalization to retain ability to share certified past performance
  5. Use only pre-PaRRVA period data under this interim arrangement
  6. Include mandatory disclaimer with all communications of past performance data
  7. Transition to PaRRVA-verified metrics for post-operationalization periods
  8. Discontinue use of pre-PaRRVA certified data two years after PaRRVA launch
  9. Follow templates to be specified by IAASB/RAASB for communicating certified performance

For IAASB/RAASB:

  1. Specify templates for certified past performance data communication within one month of this circular
  2. Consult with Industry Standard Forums for IAs and RAs and SEBI when developing templates

Mandatory Disclaimer Text:

“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.”

Important Dates

  • October 30, 2025: Circular issued, interim arrangement effective
  • Within 1 month of circular: IAASB/RAASB must specify communication templates
  • Within 3 months of PaRRVA operationalization: IAs/RAs must enroll with PaRRVA to continue sharing certified past performance
  • From PaRRVA operationalization date: Only PaRRVA-verified metrics allowed for post-launch periods
  • Two years after PaRRVA operationalization: Complete sunset of pre-PaRRVA certified performance data usage

Impact Assessment

Market Impact:

  • Provides interim business facilitation for IAs and RAs while PaRRVA infrastructure is being established
  • Enables IAs and RAs to demonstrate track record to prospective clients in a regulated manner
  • Creates standardized approach to past performance disclosure with investor protection safeguards

Operational Impact:

  • IAs and RAs must establish relationships with ICAI/ICMAI members for certification services
  • Requires modification of client communication processes to ensure one-to-one delivery and disclaimer inclusion
  • Creates compliance obligation to enroll with PaRRVA within specified timeline
  • Necessitates dual performance reporting systems during transition period (certified vs. PaRRVA-verified)
  • IAASB/RAASB must develop and publish templates within tight one-month deadline

Compliance Impact:

  • Non-compliance with circular provisions subjects entities to enforcement actions
  • Creates clear documentation requirements for past performance certification
  • Establishes definitive timelines for transition to PaRRVA-only verification regime
  • Restricts advertising and public disclosure of non-PaRRVA verified performance data

Industry Impact:

  • Addresses industry representations for ability to share past performance before PaRRVA launch
  • Creates incentive for early PaRRVA enrollment (within 3 months) to maintain performance disclosure capability
  • Standardizes performance disclosure practices across IA/RA industry
  • Provides two-year transition window for complete migration to PaRRVA verification

Impact Justification

Provides interim regulatory relief for IAs and RAs to share certified past performance with clients before PaRRVA operationalizes, with specific compliance requirements and timelines