Securities and Exchange Board of India Expands AI-Driven Enforcement to Target Finfluencers, Insider Trading and Market Abuse

India’s capital markets regulator is formalising the use of Artificial Intelligence as part of its core enforcement architecture, with a clear focus on real-time detection of market misconduct — including unregistered investment advice by financial influencers.

SEBI Chairman Tuhin Kanta Pandey confirmed that AI systems are now being deployed not only for insider trading surveillance but also to monitor financial influencers who may be “transgressing the lines” on regulated investment advice. The regulator is additionally screening advertisements to ensure they comply with SEBI rules, signalling tighter scrutiny of promotional content tied to securities and investment products.

The development marks a structural shift from complaint-driven or post-incident enforcement toward proactive surveillance. According to the regulator, AI tools are also being used in cybersecurity audits to identify vulnerabilities within market infrastructure before they escalate into systemic risks. SEBI has framed AI as an advanced supervisory instrument — comparable to earlier IT tools, but significantly more scalable and responsive.

Importantly, the Chairman noted that AI adoption will be accompanied by regulatory guardrails, with accountability clearly assigned to entities deploying such technologies. Regulation of AI, he indicated, will evolve in tandem with its expanding role in financial markets.

Beyond surveillance, SEBI confirmed that a consultation paper will soon be released on potential revisions to Portfolio Management Services (PMS) regulations, while joint work with the Reserve Bank of India is underway to develop exchange-traded corporate bond index products — an initiative requiring coordination across regulatory jurisdictions.

The message from India’s market watchdog is direct: digital influence, algorithmic tools, and evolving products will not operate outside regulatory oversight. Enforcement capacity is being upgraded to match market complexity.