SEBI Makes Intermediaries Fully Liable for AI Tools' Output and Data Privacy in Investment Operations Under 2008 Regulations

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....SEBI amended the Intermediaries Regulations 2008 by introducing Chapter IIIB concerning artificial intelligence usage. The amendment establishes that regulated entities utilizing AI and machine learning tools, whether proprietary or third-party, are solely accountable for data privacy, security, and integrity of investors' information. Entities bear complete responsibility for AI-generated outputs and regulatory compliance. The regulation encompasses all AI applications used for investment, trading, strategy dissemination, or internal operations. SEBI reserves the right to take punitive action under Chapter V for violations. The amendment defines AI tools as any software, program, or system used for investment-related activities or compliance purposes, applying to all SEBI-regulated persons as defined in regulation 16A.....