SEBI calls for accountability on AI use by market institutions | Fusion - WeRIndia

India’s Securities and Exchange Board (SEBI) has proposed stringent accountability for market infrastructure institutions and intermediaries using artificial intelligence (AI) in operations or client services.

This directive aims to ensure that entities uphold data privacy, security, and integrity, especially when managing sensitive investor information.

SEBI’s consultation paper was released Wednesday.

The paper emphasized that these entities would be responsible for any outcomes resulting from AI tools in their processes, regardless of the AI’s scale or application.

AI has become increasingly prevalent in investor services and compliance.

This is because it helps in decisions related to market analysis, stock selection, investment strategies, and portfolio management.

SEBI acknowledges AI’s efficiency in enhancing decision-making. At the same time, it also highlights the need for robust safeguards to protect investors as these tools become more integral to market operations.

In recent years, SEBI has required stockbrokers, depositories, and mutual funds to report their use of AI.

Now, the regulator is proposing that all SEBI-regulated entities utilizing AI must assume full accountability for the effects of these tools.

This responsibility includes ensuring the confidentiality, security, and accuracy of investors’ data throughout the data-handling process, even if AI-generated insights influence business or client decisions.

SEBI’s proposal further underscores that any AI-related outputs impacting services or operations must comply with legal standards.

In addition, the entities will be held liable for data protection lapses.

This accountability framework, SEBI asserts, is essential to maintain trust in AI-integrated financial services.

By proposing these requirements, SEBI seeks to encourage AI adoption while simultaneously prioritizing investor protection.

The consultation paper invites public feedback on the proposed accountability measures, with comments open until November 28.

As AI’s role in financial services grows, SEBI’s initiative serves as a proactive approach to regulating AI use.

It also ensures enhanced operational efficiency without compromising investor security.

Image by Mohamed Hassan from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on March 18, 2021

Image Reference: https://pxhere.com/en/photo/1640118