SEBI mulls advisory on risks from next gen AI tools

Mumbai: Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said on Monday that the market regulator will shortly issue an initial advisory on risks from next‑generation artificial intelligence models and AI‑led vulnerability‑scanning tools.

Speaking at the IMC Chamber of Commerce and Industry Capital Markets Conference here, Pandey said rapid technological advances in AI were reshaping capital markets by improving efficiency while creating new systemic vulnerabilities.

Pandey warned about increasing instances of sophisticated AI systems used to scan financial infrastructure for weaknesses. “While these tools can help identify weaknesses faster, they can also exploit vulnerabilities at speed and scale,” he said, adding that the risk management has become more difficult for regulators and market participants.

SEBI Chairman highlighted that the tightly connected nature of modern markets has magnified the threat.

He said technology-related risks should not be treated only at the individual‑entity level because a single weak link can pose wider market risks.

Regulated entities have been endowed with the responsibility to manage these risks, he said, urging them to proactively strengthen cyber resilience, implement continuous monitoring systems, and ensure faster remediation when vulnerabilities are identified.

Pandy stressed on preparedness and response, adding that the advisory will sit within SEBI’s broader framework of responsible innovation rather than as a restriction on technology adoption.

SEBI will place the document as an early supervisory signal and remain in active engagement with market participants and stakeholders on emerging technology risks.

The regulator has neither specified a timeline for the advisory, nor indicated if it will be entity-specific or sector-wide.

SEBI’s broader push for optimum and risk-based regulation has recently gained attention and the regulator maintained that innovation had played a key role in deepening markets through digital onboarding, faster settlement cycles and new financial products.

IANS