SEBI to issue advisory on AI risks in financial markets

SEBI to issue advisory on AI risks in financial markets

The Securities and Exchange Board of India (SEBI) is set to release an advisory on the risks associated with artificial intelligence (AI) in India's financial markets.

The move comes as part of SEBI's increasing focus on technology-related threats in these markets.

At a recent conference, SEBI Chair Tuhin Kanta Pandey highlighted the dual nature of AI as both a risk detection tool and a potential exploit.

Next-gen AI models can detect risks, exploit vulnerabilities

Pandey stressed that while next-generation AI models can quickly detect risks, they can also be used to exploit vulnerabilities across the market.

He warned that in an interconnected securities ecosystem, one weak link could lead to larger issues.

To combat this, SEBI is working with partners to enhance cybersecurity and establish continuous monitoring systems.

Investor empowerment part of SEBI's future plans

Pandey also highlighted the importance of investor empowerment in SEBI's future plans.

He said, "Protection prevents harm. Empowerment builds capability."

With a surge in investor participation through mutual funds and digital platforms, he stressed that participation should be responsible.

This means access must be matched with awareness, choice with suitability, and convenience with caution.

Need for simple, practical investor education

Pandey emphasized that investor education should be simple, practical, and continuous.

He said risks, costs, incentives, and grievance mechanisms should be explained clearly and up front.

He also stressed the need for protection from fraud as part of investor empowerment.

Investors must know who is regulated and how to verify an intermediary.