SEBI Issues AI and Machine Learning Guidelines Paper
In News
What Happened
Why It Matters
Background
History & Context
What Changed
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BEFORE: Market participants could deploy AI models for trading and advisory without specific lifecycle governance requirements. NOW: Entities must designate technically expert senior management to oversee AI operations and maintain continuous validation, documentation, and interpretability of these models.
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BEFORE: AI testing protocols were largely left to the discretion of individual financial firms. NOW: Mandatory multi-layered testing frameworks are required, including testing in segregated environments and "shadow testing" with live traffic before full deployment.
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BEFORE: Disclosures regarding AI utilization in customer-facing tools were limited and lacked standardization. NOW: Firms must explicitly disclose the use of AI/ML in algorithmic trading and portfolio management, detailing risks, model accuracy, and limitations to their clients.
Prelims Angle
NCERT Connection
Practice Questions
Q1
Correct Statement(s)With reference to SEBI's Guidelines for Responsible Usage of AI/ML in Indian Securities Markets (2025), which of the following statements is/are correct? 1. The guidelines mandate market participants to implement shadow testing with live traffic and independent auditing of AI/ML systems. 2. The framework applies a uniform, heavy regulatory burden on all AI models regardless of whether they interact directly with customers.