India: Securities and Exchange Board closes consultation on guidelines for responsible use of Artificial Intelligence and Machine Learning in security markets

On 11 July 2025, the Securities and Exchange Board of India (SEBI) closes the consultation on the draft on the responsible use of artificial intelligence (AI) and machine learning (ML) in the securities markets. The guidelines apply to SEBI-regulated entities using AI/ML in business operations that may directly impact clients, including algorithmic trading, asset management, and advisory services, while a lighter framework is proposed for internal use cases. The draft sets out obligations around continuous risk assessment, fallback mechanisms, senior management oversight, third-party vendor governance, pre- and post-deployment testing, bias mitigation, investor disclosures, data privacy, and cybersecurity. It also mandates human oversight, independent audits, and regular reporting to SEBI. A tiered, risk-based approach outlines additional controls to address concerns such as misinformation, model concentration, herding behaviour, and accountability gaps.