AI is increasingly being used in investor services and compliance operations
Regulator Sebi on Wednesday proposed holding market infrastructure institutions and intermediaries accountable for any consequences arising out of their use of artificial intelligence (AI) tools in operations or customer service.
This includes ensuring data privacy, security and integrity, especially when handling sensitive investor information.
Moreover, the entity should also be responsible for all actions taken based on AI outputs, Sebi said in its consultation paper.
AI is increasingly being used in investor services and compliance operations. Its use enables stakeholders to make informed decisions and thus play an increasingly important role in market analysis, stock selection, investment strategies and in building a portfolio in the securities they invest.
While recognizing the need for intermediaries to embrace such latest techniques and AI tools, it is equally important to ensure investor protection with the use of such tools, Sebi said.
Recognizing both the benefits of AI – such as improved efficiency, accuracy and risk management – and the need for investor protection, Sebi has previously made reporting on AI use mandatory for entities such as stockbrokers, custodians and mutual funds.
Now, the regulator has proposed in its consultation paper that all Sebi-regulated entities using AI in any capacity should be fully responsible for all outcomes of their AI use, irrespective of the extent of their AI use.
“Any person supervised by Sebi who uses such artificial intelligence tools and techniques in carrying out his business in the securities markets and for servicing his clients, irrespective of the scope and extent of adoption of such tools, shall, apart from complying with all applicable laws in force, shall be solely responsible for all consequences of such use, including ensuring the privacy, security and integrity of the data of investors and stakeholders, in particular the data held by it in any fiduciary capacity are maintained throughout the processes involved.
“…and will be responsible if any reliance is placed on the output arising from the use of such tools and techniques,” Sebi said.
The Securities and Exchange Board of India (Sebi) has sought comments on the proposal till November 28.
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