Sebi Implements Scrutiny on Investment Advisors' Risk-Return Metrics

Sebi mandates that a credit rating agency will scrutinize the risk-return metrics of services offered by investment advisers, research analysts, and algo trading providers. This regulation aims to ensure accuracy and transparency, with requirements for metrics verification and potential actions for non-compliance.

Securities and Exchange Board of India (Sebi) has announced a new regulation that mandates the examination of risk-return metrics for services provided by investment advisers, research analysts, and algorithmic trading providers. This move is part of an effort to verify the accuracy of claims regarding high returns.

Under the updated norms, a credit rating agency will function as the 'Past Risk and Return Verification Agency,' with a recognized stock exchange serving as the data center for this operation. The agency will conduct a thorough verification process, as recently detailed in notifications issued by Sebi.

The initiative aims to boost transparency and reliability of financial performance metrics shared by intermediaries. Sebi has also amended rules regarding intermediaries, credit ratings, and securities contracts to ensure compliance, cautioning that non-adherence could lead to actions by the regulator.

(With inputs from agencies.)