SEBI Mandates Full Responsibility for AI Use by Regulated Entities

The Securities and Exchange Board of India (SEBI) has mandated that regulated entities—including market infrastructure institutions, registered intermediaries, asset management companies, and managers of pooled investment vehicles—assume full responsibility for the use of artificial intelligence (AI) tools they develop or acquire. 

This directive aims to ensure that these entities uphold the privacy security and integrity of investor data and comply with applicable laws. 

In a board meeting on December 18 2024 SEBI approved the responsible use of AI among various other amendments including aligning modes of dividend payments for dividend account holders.

The approval was granted under the provisions of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, and the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018.

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SEBI emphasized that these regulations apply irrespective of the scale and scenario of Ai adoption by these entities. 

They are accountable for the output arising from the usage of such tools and techniques and must ensure compliance with applicable laws in force. 

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This development align with the governments ongoing efforts to regulate Ai and its functions. Earlier this month, MeitY Secretary S Krishnan mentioned that the IT ministry is building a mechanism to evaluate the safety and trustworthiness of AI solutions, prioritizing innovation while avoiding stifling regulations. 

Additionally in October Union Minister Jyotiraditya Scindia stressed the importance of ethical considerations and a robust regulatory framework for Ai emphasizing the need to address privacy concerns and biases.

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