SEBI is conducting a survey and creating an inventory of the AI/ML landscape in the Indian financial markets. (Photographer: Dhiraj Singh/Bloomberg)

SEBI Asks Mutual Funds To Submit Details On AI-Based Systems Every Quarter

Stepping up its surveillance on mutual funds, The Securities and Exchange Board of India on Thursday asked fund houses to provide various details about Artificial Intelligence-based systems used by them on a quarterly basis.

Mutual fund houses are required to furnish details about Artificial Intelligence and Machine Learning-based applications and systems in a prescribed format from quarter ending June 2019 to the Association of Mutual Funds in India.

SEBI is 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 and to ensure preparedness for any AI/ML policies that may arise in the future.

As most Artificial Intelligence and Machine Learning systems are "black boxes" and their behaviour cannot be easily quantified, SEBI said it was imperative to ensure that any advertised financial benefit owing to these technologies in investor-facing financial products should not constitute to misrepresentation.

According to a SEBI circular, the quarterly reports have to be submitted within 15 days from end of a quarter to AMFI, which would then consolidate the information and submit the same within 30 calendar days from the end of a quarter to SEBI.

Any set of AI and ML applications or systems that are offered to investors; used internally by mutual funds to facilitate trading; portrayed as a part of public product offering; and used for compliance and management purposes need to be reported, SEBI circular stated.

Fintech initiatives undertaken by market participants that involve AI and ML should also be reported in the prescribed form.