The Securities and Exchange Board of India (“SEBI”) has in a circular dated 9th May, 2019 issued procedure of Reporting for Artificial Intelligence (“AI”) and Machine Learning (“ML”) applications and systems offered and used by Mutual Funds; effective June, 2019. The technologies that are considered to be categorized as AI and ML technologies in the scope of this circular is enumerated in Annexure B (of the hyperlinked document below).
Background:
As there is an increasing usage of AI and ML as product offerings by market intermediaries and participants (e.g.: “robo advisors”) in investor and consumer facing products, 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 in the markets and to ensure preparedness for any AI / ML policies that may arise in the future.
The behaviour of most AI / ML systems is unknown cannot be easily quantified, thus making it necessary to ensure that any advertised financial benefit owing to these technologies in investor facing financial products offered by intermediaries is monitored and there is no misrepresentation.
Regulatory Requirements:
All registered Mutual Funds offering or using AI and ML application, or systems as defined in Annexure B, will have to participate in the reporting process by:
- Filling the AI / ML reporting form in Annexure A (of the hyperlinked document below) and
- Making submissions on quarterly basis within 15 calendar days of the expiry of the quarter to Association of Mutual Funds in India (“AMFI”) with effect from quarter ending June 2019.
AMFI will then consolidate the information on AI / ML applications and systems reported by Mutual Funds on quarterly basis and submit to SEBI at email id AIML_MF@sebi.gov.in within 30 calendar days of the expiry of the quarter, starting from quarter ending June 2019. AMFI will also maintain confidentiality regarding the information received by Mutual Funds.
Source: Securities and Exchange Board of India
