Will Sebi strengthen governance, risk framework amid rising AI, cyber risks?

In a bid to enhance its governance and risk management frameworks, the Securities and Exchange Board of India (Sebi) is addressing the increasing use of technology and the associated risks posed by emerging Artificial Intelligence (AI) models and cybersecurity threats in the capital markets. Sebi Chairman Tuhin Kanta Pandey emphasized the significance of technology as a catalyst in their operations, stating that advanced analytics, digital forensics, and AI-driven platforms are crucial for improving supervision and operational efficiency. "We will bolster our governance and risk management frameworks and capabilities. It is vital to understand that the integrity of markets relies not solely on regulators but also on the active participation of industry players to foster fairness and innovation," he asserted. During Sebi's 38th foundation day celebrations, Pandey highlighted that despite a volatile global environment, Indian markets have shown remarkable resilience. He noted that geopolitical tensions, evolving trade patterns, and rapid technological advancements continuously challenge systems and institutions. Yet, the strength of India's markets is evident in their stability, underscored by years of robust regulation and institutional development. Currently, India boasts over 5,900 listed companies and more than 140 million unique investors. Over the past decade, the market capitalization has increased by approximately 15% annually, while mutual fund assets have surged by over 20% each year. Looking ahead, Pandey stated that the future of regulation will necessitate new skills, data analytics, and interdisciplinary approaches. Following recommendations from a high-level committee addressing conflict of interest and disclosure issues, Sebi has also initiated measures to enhance its internal governance. Moreover, the regulatory body plans to invest in technology-driven oversight and collaborate with stakeholders to foster innovations that will facilitate capital formation and subsequently drive economic growth. "We are committed to streamlining regulations to enhance ease of doing business for all capital market participants," Pandey concluded. Finance Minister Nirmala Sitharaman, who attended the event, urged Sebi and regulated entities to remain vigilant as cybersecurity threats grow increasingly prevalent.