SEBI to Issue AI Usage Guidelines for Capital Markets, Says Tuhin Kanta Pandey

SEBI to issue AI usage guidelines for capital markets, focus on investor protection

New Delhi, Nov 15

The proposed guidelines will establish appropriate safeguards for the adoption of AI by market participants, including mandatory disclosures, accountability of regulated entities and a 'human-in-the-loop' approach to ensure that critical decisions remain subject to human supervision.

Speaking at the inauguration of Sebi's pavilion at the 45th India International Trade Fair (IITF) 2026, organised by the India Trade Promotion Organisation (ITPO), Pandey said the regulator was working to ensure that technological innovation does not compromise market integrity, investor safety or financial stability.

In June 2025, SEBI had issued a consultation paper proposing guiding principles for the responsible use of AI and Machine Learning (ML) applications and models in the securities market. The framework aims to maximise the benefits of emerging technologies while minimising associated risks.

Highlighting the growing cybersecurity challenges facing the financial sector, Pandey said SEBI had been continuously strengthening its cybersecurity framework to deal with emerging threats, including cyberattacks on financial institutions and cryptocurrency platforms, as well as digital frauds involving social media influencers.

The regulator introduced a structured incident response mechanism in May this year, aligned with the Financial Stability Board's FIRE reporting template, to improve the reporting and management of cybersecurity incidents.

On the potential risks associated with quantum computing, the SEBI Chairman said the regulator was undertaking an inventory of cryptographic systems and identifying areas where cryptography is being deployed to assess possible vulnerabilities.

He noted that markets globally were preparing for the security challenges posed by quantum computing, with the risks expected to become more pronounced around 2032-35. He stressed that the necessary preparations must be completed well in advance.

Pandey also highlighted Sebi's efforts to leverage AI for regulatory supervision, citing its 'Sudarshan' tool, which is being showcased at international regulatory forums. The regulator is also strengthening its AI capabilities through international initiatives and supervisory toolkits.

Separately, speaking about the listing framework for startups, Pandey said SEBI had constituted a working group to examine ways to make the Innovators Growth Platform (IGP) more attractive, particularly for deep-tech and biotechnology companies.

— IANS