New Delhi: Markets regulator SEBI has proposed the creation of a Performance Validation Agency (PVA) to validate any claims of performance by SEBI registered intermediaries and other entities.
Intermediaries/ ther entities need to showcase their performance to attract more clients and grow and continue to do business. However, in the rush for more clients, some of these entities may indulge in making inflated claims of their performance or recommendations to investors, thereby misleading the investors, said a SEBI consultation paper.
Currently, Asset Management Companies (AMCs) calculate the performance of mutual fund schemes. Similarly, portfolio managers have been permitted to report their performance vis-a-vis certain benchmarks.
The claims made by these intermediaries/entities are mostly self-verified and currently there is no dedicated agency to validate such claims.
Investment Advisers (IAs) and Research Analysts (RAs) are also inherently involved in giving investment advice and ‘buy/sell/hold’ recommendation, respectively. In terms of the advertisement code for IAs and RAs issued by SEBI, IAs and RAs are currently not allowed to make any reference to past performance.