SEBI to issue guidelines on responsible use of AI in capital markets, chief says

Pandey highlighted that while AI offers substantial benefits, it also introduces risks such as opacity, bias, data protection concerns, cybersecurity threats, and accountability issues. To address these, SEBI is developing a framework that incorporates global best practices, including principles from the International Organization of Securities Commissions (IOSCO) and NITI Aayog. The proposed guidelines are structured around five key principles: Model Governance, Mandatory Disclosures to Investors, Testing and Monitoring Protocols, Bias and Fairness, and Data Privacy and Cybersecurity.

A consultation paper has been released to solicit feedback from stakeholders on these guiding principles and a proposed tiered regulatory approach. This initiative acknowledges the increasing adoption of AI and ML technologies, including Generative AI and Large Language Models, by market participants for various functions. SEBI is committed to ensuring a 'Human-in-the-Loop' approach for critical decisions, maintaining strong human oversight alongside technological advancements. The next phase of market infrastructure development will be guided by recommendations from an expert panel tasked with creating a five-year and 10-year roadmap, with technology and secure AI systems as central pillars.