SEBI plans graded broker compliance, AI sandbox and corporate bond market reforms: Chairman
Mumbai, Oct 24
The Securities and Exchange Board of India is working on a graded compliance framework for stockbrokers, a regulatory sandbox for artificial intelligence applications and a market-making mechanism for corporate bonds, Chairman Tuhin Kanta Pandey said on Saturday.
Addressing the 16th ANMI International Capital Market Convention here, Pandey said the Securities and Exchange Board of India (SEBI) was examining a compliance regime that would vary according to a broker's scale, client exposure and reliance on technology.
"We are fixing this to improve capital efficiency and lower the compliance burden," he said.
The regulator is also developing a market-making framework to boost secondary market trading in corporate bonds.
Under the next phase of Demat 2.0, tokenised corporate bonds will be allowed to trade in the secondary market, a move that will improve liquidity, reduce settlement risks and speed up access to funds, according to Pandey.
The market watchdog is further exploring an AI sandbox that would allow new tools to be tested in a controlled environment while giving regulators an opportunity to build safeguards around their use.
According to Pandey, the regulator was finalising guidelines on the responsible use of AI based on a tiered framework that would include accountability standards, data controls, kill switches and human oversight, in line with recommendations from the International Organization of Securities Commissions (IOSCO).
Pandey said SEBI would extend the automated give-up and take-up facility in the cash segment to custodial clients such as portfolio management services (PMS) and alternative investment funds (AIFs), reducing the need to block funds while awaiting custodian confirmation.
On investor protection, the SEBI chairman warned that unregistered investment advisers and social media influencers or finfluencers were increasingly shaping retail investment decisions.
Notably, about six in ten investors rely on finfluencers for at least some investment decisions. While many such operators promise quick riches and fraudsters often misuse the names of legitimate brokers to deceive investors.
To combat such fraud, SEBI has introduced measures including validated UPI handles, the SEBI Check platform and verified labels for trading applications to help investors distinguish authentic entities from fraudulent ones.
Pandey added that SEBI would make it easier for overseas investors, including non-resident Indians, to invest in India through digital onboarding, simplified know-your-customer processes and reduced paperwork while maintaining regulatory safeguards.
— IANS
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