SEBI has introduced the PaRRVA framework to verify past performance claims made by registered intermediaries. This article explains how the framework applies to portfolio managers and the compliance requirements.
What is PaRRVA?
Definition
PaRRVA (Past Risk and Return Verification Agency) is an independent verification mechanism that validates past performance claims made by registered market intermediaries.
Purpose
PaRRVA is designed to ensure that any return figures or track records shared with clients are accurate, consistent, and independently validated. The move comes amid growing concerns that some advisers were highlighting selective or inflated returns to attract investors.
Structure
PaRRVA operates through a two-tier structure:
- A SEBI-registered credit rating agency serving as the PaRRVA
- A recognised stock exchange acting as the PaRRVA Data Centre (PDC)
SEBI has recognised Care Ratings as the first PaRRVA and NSE as the PaRRVA Data Centre.
How PaRRVA Applies to Portfolio Managers
Verification Requirement
Portfolio managers must verify past performance data through PaRRVA. Any return figures or track records shared with clients must be independently validated.
Scope of Verification
PaRRVA shall carry out the verification of risk-return metrics for Investment Advisors, Research Analysts, and those persons permitted by SEBI to offer these services.
Prospective Basis
Risk return metrics verification shall be made only on a prospective basis from the effective date of opting for the PaRRVA service.
Enrolment Requirements
Deadline for Enrolment
SEBI has directed investment advisers and research analysts to enrol with the PaRRVA network by August 3, 2026 in order to continue sharing past performance data with clients.
Phased Approach
SEBI has introduced a phased approach, giving firms time to align their internal systems and documentation. Entities will first need to compile all instances where past performance has been presented across advertisements, client reports, and digital platforms, and then ensure the data is validated through approved mechanisms.
After May 28, 2026
After May 28, only entities verified with the PaRRVA network will receive data, such as risk and return metrics. Client communication will no longer include pre-PaRRVA historical data.
Standardisation Requirements
Uniform Calculation
SEBI wants performance metrics to be calculated and displayed in a uniform manner so that investors can easily compare different advisers.
Disclosure Requirements
This includes clarity on:
- Assumptions
- Time periods
- Risk factors associated with returns
Marketing and Advertising
PaRRVA-Verified Data
Performance numbers in any advertisement, pitch deck, brochure, mailer, website page or social post must now come from PaRRVA-verified data sourced from CARE Ratings.
Required Disclaimers
All communications must carry the standard "past performance is not indicative of future results" line.
PaRRVA Summary Page
All communications must include a link or QR code back to the firm's PaRRVA summary page.
Record Keeping
Verification Records
PaRRVA will be responsible for defining verification methodologies, managing disputes and grievances, and maintaining records of verified data for at least five years.
Expert Legal Guidance
Anuj Desai & Associates provides expert legal advisory services on PaRRVA compliance for portfolio managers. Our securities law experts help clients enrol with PaRRVA, implement compliant performance verification processes, and ensure regulatory compliance. Contact us for guidance on PaRRVA and other regulatory matters.