Reporting to SEBI for Artificial Intelligence and Machine Learning Applications and systems offered and used by Market Intermediaries

Jan 07, 2019 | by Avantis RegTech Legal Research Team


The Securities and Exchange Board of India (SEBI) on January 04, 2019 has issued circular regarding reporting for Artificial Intelligence (AI) and Machine Learning (ML) applications and systems offered and used by market intermediaries.

SEBI has been conducting a survey and creating an inventory of the AI / ML landscape in the Indian financial markets to gain an in-depth understanding of the adoption of such technologies in the markets and to ensure preparedness for any AI / ML policies that may arise in the future.

·         Scope Definition:

o   Any set of applications / software / programs / executable / systems (computer systems) – cumulatively called application and systems,

a.       that are offered to investors (individuals and institutions) by market intermediaries to facilitate investing and trading, OR

b.      to disseminate investments strategies and advice, OR

c.       to carry out compliance operations / activities,

Where AI / ML has been portrayed as a part of the public product offering or under usage for compliance or management purposes, has been included in the scope of the circular. Here, “AI” / “ML” refers to the terms “Artificial Intelligence” and “Machine Learning” used as a part of the product offerings. In order to make the scope of the circular inclusive of various AI and ML technologies in use, the scope also covers Fin-Tech and Reg-Tech initiatives undertaken by market a participant that involves AI and ML.

o   Technologies that are considered to be categorized as AI and ML technologies in the scope of the circular are explained in Annexure B.

·         Regulatory Requirements:

a)      All registered Stock Brokers / Depository Participant offering or using applications or systems as defined in Annexure B, should participate in the reporting process by completing the AI / ML reporting form (see Annexure A).

b)      With effect from quarter ending March 2019, registered Stock Brokers / Depository Participant using AI / ML based application or system as defined in Annexure B, are required to fill in the form (Annexure A) and make submissions on quarterly basis within 15 calendar days of the expiry of the quarter.

c)       Stock Exchanges and Depositories have to consolidate and compile a report, on AI / ML applications and systems reported by registered Stock Brokers / Depository Participants in the reporting format (Annexure C) on quarterly basis. The said report (Annexure C) shall be submitted in soft copy only at [email protected] (for Stock Exchange) / [email protected] (for Depositories) to SEBI within 30 calendar days of the expiry of the quarter, starting from quarter ending March 2019.

[Circular No. SEBI/HO/MIRSD/DOS2/CIR/P/2019/10]

URL: https://www.sebi.gov.in/legal/circulars/jan-2019/reporting-for-artificial-intelligence-ai-and-machine-learning-ml-applications-and-systems-offered-and-used-by-market-intermediaries_41546.html


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