The Securities and Exchange Board of India (SEBI) has invited comments from all stakeholders on its newly released consultation paper on the responsible use of Artificial Intelligence (AI) and Machine Learning (ML) in the securities market. Suggestions can be submitted via email or an online submission link by July 11, 2025.
The paper outlines proposed regulatory measures for entities using AI/ML in functions such as surveillance, KYC, and cybersecurity. SEBI noted that exchanges, brokers, and mutual funds are increasingly adopting these technologies for internal operations like risk monitoring and fraud detection.
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Key recommendations in the paper include assigning responsibility to senior management for the governance and oversight of AI/ML models. SEBI has also proposed that firms follow structured processes for model testing, data quality assurance, and third-party service provider monitoring.
To protect investors and maintain fairness, SEBI suggests that companies disclose the impact of AI/ML usage to clients, ensure unbiased decision-making, and set up effective grievance redressal mechanisms.
Entities using AI/ML solely for internal applications—such as surveillance and cybersecurity—may be eligible for certain compliance relaxations under the proposed framework.
