SEBI: The Securities and Exchange Board of India (SEBI) has made another positive move to enhance facilities for everyday investors. To combat the mis-selling of investment products in the market and to improve oversight through standardized reports, SEBI has introduced a new ‘Past Risk and Return Verification Agency’. According to SEBI Chairman Tuhin Kant Pandey, the new ‘Past Risk and Return Verification Agency’ (PaRRVA) represents a technology-driven reform. Its goal is to ensure reliability and consistency in reporting through digital audit trails.
This agency will assess the truthfulness of past return claims made by market-related institutions. Care Ratings and NSE have collaboratively launched PaRRVA as a pilot initiative. This effort will assist investors in obtaining accurate and trustworthy information. It is a novel verification system aimed at validating past performance claims made by regulated market intermediaries.
What is PaRRVA?
SEBI has implemented this measure to tackle the increasing number of financial influencers and unregistered entities. With the launch of PaRRVA, any registered investment advisor, research analyst, or broker who makes a claim about stock returns will need to verify their assertions through Care PaRRVA first. This process will necessitate the verification of claims before any advertising can take place. Additionally, promoting returns will become challenging without prior verification.
Why is SEBI enhancing oversight on performance claims?
This new system has been established to reduce the risks associated with fin-influencers and misleading claims. SEBI Chairman Tuhin Kant Pandey mentioned that numerous unregistered individuals and fin-influencers in the market are enticing investors with false or exaggerated return claims.
This hinders the efforts of authentic, regulated organizations. He also mentioned that if registered intermediaries (like investment advisors and research analysts) could share the data they gather during their due diligence, investors would be able to make more informed and better decisions.
What’s the upside?
The issue of fake advisory services has been around in the stock market for a long time. Numerous unregistered advisors and financial influencers trick people by guaranteeing high returns. But that won’t be as simple anymore. If SEBI’s new system works as intended, fraudulent stock return claims will be caught right away.