Research Analysts (RAs) are prohibited from making past performance claims unless the performance is verified by the Past Risk and Return Verification Agency (PaRRVA). This requirement ensures that performance claims are accurate, reliable, and not misleading. This article provides a comprehensive technical analysis of this requirement.
Regulatory Basis
Advertisement Code Requirement
The Advertisement Code circular dated April 5, 2023 (SEBI/HO/MIRSD/MIRSD-PoD-2/P/CIR/2023/51) prohibits:
"Reference to past performance or risk-return metrics in respect of the services of Research Analyst 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."
PaRRVA Framework
The circular dated April 4, 2025 (SEBI/HO/MIRSD/MIRSD-POD/P/CIR/2025/51) on "Recognition and operationalization of Past Risk and Return Verification Agency (PaRRVA)" provides the detailed framework.
What is PaRRVA?
Definition
PaRRVA is the Past Risk and Return Verification Agency recognized by SEBI to verify the performance claims of RAs and IAs.
Purpose
- Verify performance claims
- Ensure accuracy of performance data
- Protect investors from misleading claims
- Standardize performance reporting
Operationalization
PaRRVA verifies performance prospectively for the period post-onboarding of the RAs/IAs with PaRRVA.
Interim Arrangement
For Period Prior to PaRRVA Operationalization
The circular dated October 30, 2025 (HO/38/12/11(1)2025-MIRSD-POD/I/73/2025) provides for an interim arrangement:
RAs may provide past performance data certified by a member of ICAI/ICMAI to a client (including prospective client) only on specific request of such client.
Conditions for Interim Arrangement:
- Past performance data must be certified by a member of ICAI/ICMAI
- Communication must be on a one-to-one basis
- Past performance data shall not be made available to the general public through public media/website or any other mode
- RAs must enroll with PaRRVA within three months of its operationalization
- The disclaimer must accompany any communication of past performance data
Disclaimer for Interim Arrangement
"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 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 RAASB (as the case may be) is not a guarantee or assurance of future returns."
The PaRRVA Verification Requirement
When is PaRRVA Verification Required?
PaRRVA verification is required when:
- An RA makes a reference to past performance
- An RA makes a reference to risk-return metrics
- The claim is made in an advertisement
- The claim is made in any public communication
What is Verified by PaRRVA
- Risk metrics
- Return metrics
- Performance data
- Performance calculations
- Performance methodology
What is NOT Verified by PaRRVA
- Future performance projections
- Forward-looking statements
- Performance data from unverified sources
Prohibitions
1. Unverified Past Performance Claims
Prohibition: RAs cannot make past performance claims unless verified by PaRRVA.
2. Public Advertising of Unverified Performance
Prohibition: RAs cannot advertise past performance in public media unless verified by PaRRVA.
3. Inconsistent Performance Claims
Prohibition: RAs cannot make performance claims that are inconsistent with PaRRVA-verified data.
Timeline
| Event | Timeline |
|---|---|
| PaRRVA Operationalization | Date of recognition |
| Enrollment with PaRRVA | Within 3 months of operationalization |
| Interim Arrangement | Until PaRRVA operationalization |
| After 2 Years | Only PaRRVA verified performance allowed |
Common Compliance Gaps
1. Unverified Performance Claims
Some RAs make past performance claims without PaRRVA verification.
Solution: Only make performance claims verified by PaRRVA.
2. Public Advertising of Unverified Performance
Some RAs publicly advertise unverified performance.
Solution: Only advertise performance verified by PaRRVA.
3. Not Including Disclaimer
Some RAs do not include the required disclaimer for interim arrangements.
Solution: Include the prescribed disclaimer.
4. Not Enrolling with PaRRVA
Some RAs do not enroll with PaRRVA within the specified timeline.
Solution: Enroll with PaRRVA within three months of operationalization.
Conclusion and How Anuj Desai & Associates Can Help
Past performance claims are strictly regulated. RAs must ensure all performance claims are verified by PaRRVA.
Anuj Desai & Associates offers specialized services to help RAs comply with the PaRRVA verification requirement:
- Guidance on PaRRVA enrollment
- Review of performance claims
- Assistance with interim arrangement
- Compliance audit and advisory
Contact us today to ensure your performance claims comply with SEBI requirements. Our team will review your claims and provide a tailored compliance roadmap.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.