Regulator Sebi on Wednesday proposed holding market infrastructure institutions and intermediaries accountable for any consequences arising from their use of artificial intelligence (AI) tools in operations or client services.

This includes ensuring data privacy, security, and integrity, particularly when handling sensitive investor information.

Additionally, the entity should also be accountable for any actions taken based on AI outputs, Sebi said in its consultation paper.

AI is being increasingly used in investor services and compliance operations. The usage is enabling stakeholders in making informed decisions and thus playing increasingly significant role in market analysis, stock selection, investment strategies and in building a portfolio in their invested securities.

However, while recognising the need for intermediaries to embrace such latest techniques and AI tools, it is equally important to ensure the protection of investors with the usage of such tool, Sebi said.

Recognising both the advantages of AI — like enhanced efficiency, accuracy, and risk management — and the need for investor protection, Sebi has earlier mandated reporting on AI usage for entities like stockbrokers, depositories, and mutual funds.

Now, the regulator, in its consultation paper, has proposed that all Sebi regulated entities that use AI in any capacity must be fully responsible for all outcomes of its AI use, regardless of the extent of their AI usage.

“Every person regulated by Sebi that uses such artificial intelligence tools and techniques while conducting its activities in the securities markets and for servicing its clients, regardless of the scope and size of adoption of such tools, shall apart from complying with all applicable laws in force be solely responsible for all the consequences of such use including ensuring the privacy, security and integrity of the investors’ and stakeholders’ data especially the data maintained by it in a fiduciary capacity, throughout the processes involved.

“…and shall be responsible if the output arising from the usage of such tools and techniques is relied upon or dealt with,” Sebi said.

The Securities and Exchange Board of India (Sebi) has sought public comments till November 28 on the proposal.

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Britain’s new Labour government has said it will explore how to effectively regulate artificial intelligence models, but stopped short of proposing any specific laws.

King Charles set out newly-elected Prime Minister Keir Starmer’s legislative agenda in a speech on Wednesday to open the new session of parliament. It included more than 35 new bills covering everything from housing to cyber security measures.

The government said it would seek to establish the appropriate legislation to place requirements on those working to develop “the most powerful artificial intelligence models.”

The country’s last prime minister Rishi Sunak had sought to position Britain as a world leader in AI safety, bringing world leaders and company executives together last November for a summit at Bletchley Park to discuss the issue.

He also oversaw the launch of the world’s first AI Safety Institute, which has focused on the capabilities of “frontier” AI models, such as those behind OpenAI’s highly successful ChatGPT chatbot.

“AI labs will be collectively breathing a sigh of relief at the government’s decision not to rush ahead with frontier model regulation,” said Nathan Benaich, founding partner of AI-focused investment group Air Street Capital.

Under Sunak, the government avoided introducing targeted AI regulation, opting instead to split responsibility for scrutinising the technology between various regulators.

Starmer has promised to introduce new laws on AI, but his government is taking a careful approach to rolling them out.

“The UK’s cautious, sector-based approach to AI regulation remains a crucial competitive advantage versus the EU, and any moves to change this regime should only be taken with the utmost caution,” Benaich said.

But some AI experts say the rapid rollout of AI tools over the past 18 months only makes the need for new legislation more urgent.

Gaia Marcus, director of the Ada Lovelace Institute, said the government should bring forward a bill as soon as possible.

“These systems are already being integrated into our daily lives, our public services and our economy, bringing benefits and opportunity, but also posing a range of risks to people and society,” she said.

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