SEBI Cracks Down On Financial Influencers With AI-Based Real-Time Surveillance

India’s market regulator, the Securities and Exchange Board of India (SEBI), is deploying artificial intelligence (AI) to strengthen surveillance and enforcement against market misconduct.

This includes illegal investment advice and insider trading, SEBI chairman Tuhin Kanta Pandey said at a press briefing at the National Institute of Securities Markets campus in Mumbai.

According to Pandey, the enforcement model at SEBI is changing to be less reactive in terms of investigations and more proactive in terms of monitoring in real time through the use of AI tools, which can better and faster detect suspicious activity than the traditional system.

How SEBI Is Using AI For Market Oversight?

SEBI will use AI in the market for:

1. Real-Time Detection Of Market Abuse

SEBI is harnessing AI algorithms to track illegal investment advice and unregistered advisory activity. The AI will also detect real-time signals of insider trading and abnormal trading behaviour.

This technology allows the regulator to spot patterns as they happen, rather than waiting for complaints or tips to trigger manual investigations.

2. Monitoring Influencers And Advertisements

AI systems will be used to examine content from financial influencers and promotional material to ensure compliance with SEBI regulations.

This includes identifying individuals or groups who provide investment tips without proper registration or disclosure.

3. Strengthening Cyber Security And Surveillance

Beyond market misuse, AI is also being used to audit and improve cybersecurity infrastructure.

This will enable SEBI to detect vulnerabilities and irregularities proactively rather than after a breach has occurred.

What Other Regulatory Changes Are In The Pipeline?

Other than AI enforcement, SEBI is gearing up for changes in other regulatory fields.

Pandey affirmed that a consultation paper will shortly be published to get the opinion of the people regarding any changes to the Portfolio Management Services (PMS) regulations.

The review aims to rationalise certain aspects of the framework identified since 2020, although the final scope is still being developed.

Additionally, SEBI and the Reserve Bank of India (RBI) are jointly working on developing a corporate bond index and related exchange-traded products.

Since these instruments would trade on exchanges, they fall under both regulators’ jurisdictions. The initiative is aimed at deepening India’s debt markets.

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What Does This Mean For Investors?

To investors, the increased application of AI by SEBI is an indication of enhanced oversight over the market and an increase in crackdowns against unlawful advisory practices and insider trading. This would increase market transparency and the protection of investors in the long run.

More checks are likely to mean tighter rules for intermediaries and market influencers. PMS norms are being looked at again, and there is also talk of corporate bond index products. This shows changes underway in wealth management and fixed income, with some new opportunities but more compliance as well.

SEBI is leaning more on technology now. The intent seems to be to tighten supervision while avoiding any disruption to the market, even as more activity moves online.

Sources:

TribuneIndia

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