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Past performance: A regulatory diktat?

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On April 05, 2023, SEBI by way of a circular issued an advertisement code for Research Analysts (RAs) and Registered Investment Advisers (RIAs) which inter alia prohibited RIAs and RAs from making any reference to their past performance.
This compliance requirement has once again brought into the spotlight a popular platform amongst young investors which provides SEBI registered RIAs and RAs a platform who in turn curate a basket of stocks, exchange-traded funds, REITs, mutual funds and other domestic and global securities to track a particular objective or a strategy for investors. The platform allows users to see the returns made on the recommendations provided by such RIAs / RAs.
In this background, Mr. Sumit Agrawal, Managing Partner of Regstreet Law Advisors and former SEBI Officer has offered his insights for an article published in the LiveMint. He is of the view that “The issue of showing past performance can be a contentious one. It is an enforcement issue. Regulators like SEBI often impose restrictions on RIAs to ensure that investors don’t solely rely on past performance, which may not guarantee future results. Smallcase, on the other hand, might have a different interpretation or approach to compliance.”
He was further of the view that “Disparity, if any, can lead to frustration among RIAs who may feels it’s unfair competition. It’s crucial for regulatory authorities and platforms like Smallcase to have a clear dialogue to address these concerns and ensure a level playing field for all participants in the financial industry. It’s a nuanced issue, and finding a balanced solution is essential for investor protection and industry fairness.”
Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com
A copy of the LiveMint article is enclosed below and also accessible at: How Smallcase has queered to pitch for Advisers and Analysts

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