The Securities and Exchange Board of India (SEBI) is planning to introduce safeguards for the use of artificial intelligence (AI) in the country’s capital markets, with investor protection emerging as a key priority. As AI adoption gains momentum across financial services, the regulator is looking to address potential risks arising from its use in trading, investment advisory and other market-related activities. The proposed guardrails are expected to focus on ensuring transparency, accountability and responsible use of AI, while preventing misuse of technology that could expose investors to financial risks.
SEBI chairman Tuhin Kanta Pandey said, “the proposed guidelines would focus on establishing appropriate guardrails for AI use, including disclosures, accountability of regulated entities and a ‘human-in-the-loop’ approach to ensure that critical decisions are subject to human oversight.”
Pandey said the regulator has been continuously strengthening its cybersecurity framework to address rising cyber threats.
He further highlighted the growing concerns over cyberattacks targeting financial institutions and cryptocurrency platforms, as well as digital frauds involving social media influencers.
On quantum computing-related risks, the Chairman said Sebi is undertaking an inventory of cryptographic systems and identifying areas where cryptography is being used to assess potential vulnerabilities.
In June 2025, Sebi floated a consultation paper proposing guiding principles for responsible usage of Artificial Intelligence (AI)/ Machine Learning (ML) applications/models in securities markets.
These guiding principles are intended to optimise benefits and minimise potential risks associated with the integration of AI/ML based applications in securities markets to safeguard investor protection, market integrity, and financial stability.
He said markets globally are preparing for the risks posed by quantum computing, with concerns expected to become more pronounced around 2032-35, and stressed the need to complete preparations well in advance.
On AI adoption, he said Sebi has also developed several supervisory tools, including its ‘Sudarshan’ tool, which is being demonstrated at international regulatory forums.
The regulator is also working on strengthening its AI capabilities through international initiatives and supervisory toolkits, he added.
SEBI Plans AI Guardrails For Capital Markets, Investor Protection In Focus
