The Securities and Exchange Commission of India (SEBI) has invited comments from all stakeholders to the newly released consultation paper on the responsible use of artificial intelligence (AI) and machine learning (ML) in the securities market. Proposals can be sent by July 11, 2025 via email or online submission link.
This paper proposed regulatory measures for entities using AI/ML for features such as surveillance, KYC, and cybersecurity. Sebi noted that exchanges, brokers and mutual funds are increasingly adopting these technologies for internal operations such as risk monitoring and fraud detection.
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Key recommendations for the paper include assigning responsibility to senior management for governance and oversight of the AI/ML model. SEBI also proposes that companies follow a structured process for model testing, data quality assurance, and monitoring third-party service providers.
To protect investors and maintain equity, SEBI suggests that companies will disclose to clients the impact of AI/ML use of their clients, ensure fair decision-making and establish effective complaints relief mechanisms.
Entities that use AI/ML only for internal applications, such as monitoring and cybersecurity, may be subject to specific compliance mitigation under the proposed framework.
