Sebi proposes 5-point AI rulebook for securities market. Check details

Synopsis

Sebi has released a consultation paper proposing a 5-point regulatory framework for the responsible use of AI and ML in India’s securities markets. The guidelines focus on governance, transparency, fairness, data security, and risk controls, aiming to balance innovation with investor protection.

Securities and Exchange Board of India (Sebi) is considering preparing guidelines for the responsible usage of Artificial Intelligence or Machine Learning in securities markets. The market regulator on Friday released a consultation paper seeking public feedback on five broad-based guiding principles that could be part of the regulatory framework.

With AI/ML use growing across exchanges, brokers, and mutual funds, Sebi aims to strike a balance between innovation and regulation. The proposed framework covers governance, data security, bias prevention, investor protection, and risk controls.

The last date to send comments/suggestions is July 11.

Earlier, Sebi constituted a working group to study Indian, global best practices in AI/ML, mandating it to prepare guidelines for the usage of AI/ML applications. The working group was also tasked with providing recommendations to address concerns and issues related to the use of AI/ML applications.

Also Read: Sebi eases delisting norms for PSUs with over 90% government holding

Here are 5 guiding principles:

1) Model governance

Market participants must set up internal teams with the technical expertise to monitor AI/ML models, document model development, and handle exceptions. Senior management will be held accountable for the entire AI lifecycle, including oversight of third-party vendors.

2) Mandatory disclosure

3) Robust testing & monitoring norms

4) Fairness and bias

5) Data security

Also Read: Sebi board meeting: Regulator approves PSU delisting, IPO reforms, dematerialisation of Securities. 10 key takeaways

Sebi has suggested a lighter regulatory approach for internal-use models (e.g., surveillance), while models affecting clients would face stricter controls.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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