Securities and Exchange Board of India (SEBI) has introduced the SEBI (Intermediaries) (Amendment) Regulations, 2025, which include a new Chapter IIIB on the usage of artificial intelligence (AI) and machine learning (ML) by intermediaries. Under Regulation 16C, any SEBI-regulated entity using AI and ML tools, whether developed in-house or sourced from third parties, is solely responsible for ensuring data privacy, security, and integrity. These entities must also be accountable for the accuracy of AI-generated outputs and compliance with applicable laws. SEBI retains the authority to take enforcement action in case of violations.
The amendment, effective upon its publication in the Official Gazette, defines AI and ML tools broadly to include applications used for investment strategies, trading, compliance, and business management. The new regulation aims to address concerns related to data security, investor protection, and regulatory compliance as AI adoption increases in the financial sector.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES) (AMENDMENT) REGULATIONS, 2025
No. SEBI/LAD-NRO/GN/2025/226.—In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, namely: –
1. These regulations may be called the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2025.
2. They shall come into force on the date of their publication in the Official
3. In the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, after Chapter IIIA and before Chapter IV, the following Chapter shall be inserted, namely, –
“CHAPTER IIIB
USAGE OF ARTIFICIAL INTELLIGENCE
Responsibility for the use of artificial intelligence.
16C. (1) Any person regulated by the Board who uses artificial intelligence and machine learning tools and techniques, either designed by it or procured from third-party technology service providers, irrespective of the scale and scenario of adoption of such tools for conducting its business and servicing its investors, shall be solely responsible –
a) for the privacy, security and integrity of investors’ and stakeholders’ data including data maintained by it in a fiduciary capacity throughout the processes involved;
b) for the output arising from the usage of such tools and techniques it relies upon or deals with; and
c) for the compliance with applicable laws in
(2) The Board may, in case of violation of the provisions of sub-regulation (1), take such action as it may deem fit including action under Chapter V of these regulations.
Explanation: For the purpose of this regulation, –
a) the expression “artificial intelligence and machine learning tools and techniques” may include any application or software program or executable system or a combination thereof, offered by the person regulated by the Board to investors/stakeholders or used internally by it to facilitate investing and trading or to disseminate investment strategies and advice or to carry out its activities including compliance requirements and the same are portrayed as part of the products offered to the public or under usage for compliance or management or other business purposes;
b) the expression “person regulated by the Board” shall have the same meaning as provided under Explanation 1 to regulation 16A.”
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./949/2024-25]
Footnote:
1. The Securities and Exchange Board of India (Intermediaries) Regulations, 2008 was published in the Gazette of India, Part III Section 4 on May 26, 2008 vide notification LAD-NRO/GN/2008/11/126538.
2. The Securities and Exchange Board of India (Intermediaries) Regulations, 2008 was subsequently amended on: –
a) August 11, 2008 by the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2008, vide notification No. LAD-NRO/GN/2008/20/134766.
b.) July 14, 2009 by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2009, vide notification no. LAD-NRO/GN/2009-10/12/169546.
c) January 7, 2014 by the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, vide notification no. LAD-NRO/GN/2013-14/36/12.
d) May 25, 2016 by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2016, vide notification no. SEBI/LAD-NRO/GN/2016-17/006.
e) November 21, 2017, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2017, vide notification no. SEBI/LAD-NRO/GN/2017-18/021.
f) April 17, 2020, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020, vide notification no. SEBI/LAD-NRO/GN/2020/10.
g) January 21, 2021, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/07.
h) May 5, 2021, by the Securities and Exchange Board of India (Intermediaries) (Second Amendment) Regulations, 2021,vide notification no. SEBI/LAD-NRO/GN/2021/20.
i) August 3, 2021, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/30.
j) November 17, 2021,by the Securities and Exchange Board of India (Intermediaries) (Third Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/59.
k) August 1, 2022, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2022, vide notification no. SEBI/LAD-NRO/GN/2022/91.
l) August 29, 2024, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024, vide notification no. SEBI/LAD-NRO/GN/2024/201.
m) December 5, 2024, by the Securities and Exchange Board of India (Intermediaries) (Second Amendment) Regulations, 2024 vide notification no. SEBI/LAD-NRO/GN/2024/216.
