SEBI Issued Framework for Registration of Performance Validation Agency

Current Context: On April 4, 2025, the Securities and Exchange Board of India (SEBI) introduced a framework for the registration of the Past Risk and Return Verification Agency (PaRRVA).

Purpose:

The initiative ensures transparency and prevents misleading claims about financial product returns and risks made by research analysts, investment advisors, and stock brokers.

Eligibility:

Only credit rating agencies (CRAs) with:
A minimum 15 years of experience, and
A net worth of at least ₹100 crore can register as PaRRVA.

Pilot Phase:

SEBI has initiated a two-month pilot phase for testing PaRRVA's verification services. During this phase, agencies will verify claims based on historical risk and return metrics.

Disclosure Rules:

Disclaimers regarding risk-return metrics are mandatory, ensuring compliance with the new framework.
This structured approach by SEBI aims to empower investors, strengthen market integrity, and enhance accountability among financial service providers.

Question:

Q.1 What is the minimum net worth required for a credit rating agency (CRA) to register as PaRRVA?
a) ₹50 crore
b) ₹100 crore
c) ₹75 crore
d) ₹150 crore

Answer: b) ₹100 crore Explanation: To register as PaRRVA, CRAs must have a minimum net worth of ₹100 crore, ensuring they have the financial stability to handle such responsibilities.