The Securities and Exchange Board of India (SEBI) has proposed new guidelines aimed at ensuring the protection of investors’ data when artificial intelligence (AI) and machine learning (ML) tools are used in the securities market. The proposal, outlined in a consultation paper issued on Wednesday, focuses on the responsibility of market infrastructure institutions and intermediaries to maintain the privacy and integrity of investor data.
SEBI’s proposed rules would hold these institutions and intermediaries “solely responsible” for ensuring the protection of data they maintain on behalf of investors, especially when AI/ML tools are used in their business activities. The market regulator has given a deadline of November 28 for the public to submit their feedback on these proposals.
The use of AI and ML technologies in the securities market has grown significantly in recent years. These tools offer benefits such as enhanced efficiency, quicker reporting, and better decision-making, which can improve market operations. AI/ML can help in tasks such as risk assessment, data analysis, and client servicing, providing a more efficient system for both investors and market participants.
SEBI noted that while the use of AI/ML tools is essential to improve efficiency and competitiveness in the securities market, it is equally important to protect investors’ personal and financial information. The consultation paper emphasizes that market participants using these technologies should be responsible for managing the privacy and security of investor data.
The consultation paper also outlines the specific changes that SEBI plans to make to existing regulations. These regulations apply to stock exchanges, clearing corporations, depositories, participants, and intermediaries in the securities market. The amendments aim to set clear guidelines for how these entities should handle AI/ML technologies, ensuring that they do so in a way that is both efficient and secure.
SEBI is calling for public feedback on these proposed changes, seeking input from various stakeholders, including investors, market participants, and other industry experts. The regulator hopes to create a regulatory framework that balances the need for technological innovation with the need to protect investors’ interests.
