SEBI Says Regulated Entities Will Now Be Responsible For AI Use

SUMMARY

Regulated entities will now have to take full responsibility for the use of artificial intelligence (AI) designed by them or acquired from others, as per SEBI

The regulations shall be applicable irrespective of the scale and scenario of adoption of such tools for conducting its business and servicing its investors

These enterprises will be responsible for the privacy, security and integrity of investors’ and stakeholders’ data including information maintained in a fiduciary capacity

Markets regulator Securities and Exchange Board of India (SEBI) has said that regulated entities will now have to take full responsibility for the use of artificial intelligence (AI) designed by them or acquired from others.

The regulated entities could comprise market infrastructure institutions (MIIs), registered intermediaries, asset management companies (AMCs) and managers of pooled investment vehicles.

SEBI’s board approved the responsible use of AI among various other amendments, including aligning modes of dividend payments for dividend account holders, in a meeting on Wednesday (December 18).

The approval of the board came under the provisions of Securities and Exchange Board of India (Intermediaries) Regulations, 2008, Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, and the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018.

Such businesses who use AI tools, either designed by them or procured from third-party technology service providers should take full responsibility for their use of AI tools, said the markets regulator and continued, “the regulations shall be applicable irrespective of the scale and scenario of adoption of such tools for conducting its business and servicing its investors.”

SEBI highlighted that these enterprises will be responsible for the privacy, security and integrity of investors’ and stakeholders’ data including information maintained in a fiduciary capacity.

These companies will also be countable for the output arising from the usage of such tools and techniques it relies upon or deals with and the compliance with applicable laws in force, SEBI added.

The development comes at a time when the Centre has been working to regulate AI and its functions for quite some time.

Earlier this month, MeitY secretary S Krishnan at CII’s Global Economic Policy Forum said the IT ministry is building a mechanism to evaluate the safety and trustworthiness of AI solutions by prioritising innovation, it aims to avoid stifling regulations, instead focusing on assessment.

Also, in October, union minister Jyotiraditya Scindia stressed on ethical considerations and robust regulatory framework for the use of AI, while also said that ensuring positive impact of advanced technologies, privacy concern and bias is necessary to be addressed.