Sebi Mandates AI Disclosure for Investment Advisers: Ensuring Transparency and Data Security

Securities and Exchange Board of India (Sebi) has proposed that registered Investment Advisers (IA) and Research Analysts (RA) must disclose the extent of their AI tool usage to clients. This move emphasizes transparency and the importance of data security measures to avoid unintended data exposure. The consultation paper highlights the growing role of AI in financial services while stressing that technology should complement, not replace, human expertise.

The Securities and Exchange Board of India (Sebi) has introduced a proposal requiring registered Investment Advisers (IA) and Research Analysts (RA) to disclose the extent of their AI tool usage to their clients. This move aims to promote transparency and ensure robust data security, preventing unintended data exposures.

This disclosure is essential for clients to grasp how AI tools influence their investment decisions and to make well-informed choices about their advisory services. ‘The possibility of unintended data exposure underscores the need for strong security measures and clear disclosure,’ said Trivesh D, COO at Tradejini.

Sebi's consultation paper reflects on how AI can enhance efficiency in financial advisory services but warns against potential risks. The paper suggests that technology must complement human judgment and expertise to navigate India's complex financial landscape, further emphasizing the need for a balanced approach.