This is a technology-driven, data-based system that adds credibility and consistency to performance reporting.The framework connects a rating agency acting as PaRRVA with an exchange that acts as a data center. Together they would independently verify past returns, using a transparent and standardized methodology, the regulator said.
“Performance reporting in the securities markets has long posed risks to investors. Finfluencers often lure investors with exaggerated or fabricated returns,” Pandey said.
“Unscrupulous intermediaries further fuel investor uncertainty with exaggerated claims,” he said.
Current rules do not allow stockbrokers, investment advisors and research analysts to reference past performance, making it difficult to establish their credentials. “Unregistered entities are making unverified claims, attracting investors away from regulated intermediaries. Well-regulated entities are struggling to attract investors despite genuine track records,” the Sebi chairman said.
The regulator said intermediaries should not selectively display PaRRVA-verified returns on a specific product or service. Further, the verified performance would be for specific time periods and an arbitrary selection of dates or time periods to present a favorable outcome would not be permitted.
On the sidelines of the launch event, Pandey said Sebi will change the rules to ban the use of live stock market data for educational purposes.
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