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Informist, Wednesday, Dec. 18, 2024

MUMBAI – The Securities and Exchange Board of India Wednesday approved the proposal to recognise a past risk and return verification agency, which will verify the risk-return metrics related to services of regulated individuals or agents. This agency will be operational on a pilot basis for two months, during which it will seek feedback from shareholders and fine-tune technological systems and processes for a streamlined experience for stakeholders, the market regulator said in a press release.

A credit rating agency can act as such a verification agency with a recognised stock exchange. The agency will also verify risk-return metrics for investment advisors, research analysts, algorithmic trading, and for other regulated individuals. However, this verification will be made only on a prospective basis from the effective date of opting for the agency's service, SEBI said. If one does not wish to make a claim related to their past risk-return metrics, it will not be mandatory for such individuals or agents to avail the agency's services. 

The proposal was made more than a year ago to validate any claims of performance by SEBI-registered individuals or entities. In August 2023, the regulator said that there was demand from registered entities to showcase their performance to investors to enhance their credibility, which would help them expand their services to investors. "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," the regulator said in its consultation paper last year. The mechanism would help safeguard investors from unverified claims or performances, SEBI had said.  End

Reported by Anjana Therese Antony

Edited by Deepshikha Bhardwaj

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