SEBI Directives on AI in Algorithmic Trading & Robo-Advisory Services
Statutory Overview
SEBI regulatory directives establish strict oversight on algorithmic trading systems, autonomous order routing, and AI-driven wealth advisory platforms, guarding against flash crashes and unverified predictive claims.
Key Compliance Requirements for AI Companies
Mandatory algorithmic testing in SEBI regulatory sandboxes before live market order execution.
Prohibition against deceptive marketing claiming 'guaranteed AI returns' or 'flawless algorithmic prediction'.
System audit trails storing every model version, input feature, and execution decision for a minimum of 5 years.
Legislative Timeline & Milestones
Consultation Paper on AI Wealth Tech
SEBI reviews risks associated with unregistered social media AI trading bots.
Final Circular
Strict registration and code audit guidelines promulgated.
Official Gazette & Regulatory References
Frequently Asked Questions & Legal Interpretations
Q:Are AI stock recommendation apps allowed under SEBI?
Only if the entity holds a valid SEBI Investment Adviser (RIA) or Research Analyst (RA) registration and conforms to disclosure standards.