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SEBI has issued new guidelines with respect to usage of artificial intelligence (AI) and machine learning (ML) tools by all SEBI regulated intermediaries in which the market regulator has clarified that their regulated entities can leverage AI and ML to improve their services.
However, SEBI has clarified that the regulated entities will have to take complete responsibility of such tools.
SEBI registered entities like AMCs, PMS/AIF, REITs/InvITs and RIAs that use AI for business operations and investor services are responsible for investor data (including fiduciary data) and the results derived from AL and ML tools, said SEBI.
In the new regulations, the regulator explained, "(1) Any person regulated by the Board who uses artificial intelligence and machine learning tools and techniques, either designed by it or procured from third-party technology service providers, irrespective of the scale and scenario of adoption of such tools for conducting its business and servicing its investors, shall be solely responsible – a) for the privacy, security and integrity of investors’ and stakeholders’ data including data maintained by it in a fiduciary capacity throughout the processes involved; b) for the output arising from the usage of such tools and techniques it relies upon or deals with; and c) for the compliance with applicable laws in force."
SEBI also clarified that these rules apply regardless of whether AI tools are developed in-house or sourced from third-party service providers. AMCs using machine learning-based investment strategies, such as quant methodologies, are also subject to these regulations.
