SEBI Framework for Recognition and Operationalization of PaRRVA

The Securities and Exchange Board of India (“SEBI”) has issued a circular bearing no. SEBI/HO/MIRSD/MIRSD-POD/P/CIR/2025/51 dated April 4, 2025, introducing a comprehensive framework for the recognition and operationalization of the Past Risk and Return Verification Agency (“PaRRVA”).

Key Highlights of the Circular

Introduction of PaRRVA and PDC Framework

SEBI has notified a detailed structure for the establishment of PaRRVA and its associated technological arm, the PaRRVA Data Centre (“PDC”). These entities will independently verify risk and return metrics claimed by regulated intermediaries such as Investment Advisers, Research Analysts, and Algo Providers.

Eligibility Criteria for Recognition

Only Credit Rating Agencies with at least 15 years of continuous operations, a net worth of Rs. 100 crore, and a track record of rating 250 or more issuers may apply for recognition as a PaRRVA. For serving as a PDC, only Stock Exchanges with a nationwide presence and a net worth of at least ₹200 crore are eligible.

Process of Recognition

Recognition will be granted in two stages—initial in-principle approval, followed by final recognition upon successful completion of a pre-recognition audit and compliance with SEBI’s prescribed cybersecurity framework. A pilot launch of two months will follow, allowing for industry feedback and system refinements.

Standardized Verification and Security Protocols

SEBI has prescribed detailed requirements for the development of verification methodologies, system design, contractual agreements, and grievance redressal mechanisms. PaRRVA and PDC are jointly responsible for ensuring data integrity, system reliability, and adherence to all regulatory norms.

SEBI's latest circular marks a significant step towards enhancing transparency and accountability in performance-based investment claims. By establishing a standardized and independent verification framework through PaRRVA, SEBI aims to build greater investor confidence and ensure the integrity of financial advice and research in the securities market.