The Securities and Exchange Board of India will soon issue an initial advisory highlighting risks arising from next-generation artificial intelligence models and AI-led vulnerability detection tools, SEBI Chairman Tuhin Kanta Pandey has said.
Speaking at the IMC Chamber of Commerce and Industry Capital Markets Conference 2026, Pandey said rapid technological advances were reshaping capital markets, creating both efficiencies and new vulnerabilities. "SEBI will soon issue an initial advisory on risks emanating from such models and AI-led vulnerability detection tools," he said.
Pandey said sophisticated AI systems were increasingly being used to scan financial infrastructure for weaknesses, making risk management more complex for regulators and market participants. "While these tools can help identify weaknesses faster, they can also exploit vulnerabilities at speed and scale," he said, adding that the challenge was magnified by the tightly connected nature of modern markets.
He cautioned that technology-related risks cannot be viewed in isolation at the entity level. "In an interconnected securities market, a single weak link can create wider risks," Pandey said.
Responsibility for managing these risks has been clearly placed on regulated entities. SEBI expects intermediaries and market institutions to proactively strengthen cyber resilience, put in place continuous monitoring systems, and ensure faster remediation when vulnerabilities are identified. The emphasis is on preparedness and response, rather than reactive enforcement.
The advisory will be positioned within SEBI's broader framework of responsible innovation rather than as a restriction on technology adoption. The regulator has indicated that it remains in constant engagement with market participants and relevant stakeholders on emerging technology risks, suggesting the advisory is intended as an early supervisory signal rather than a rulebook.
At the same time, SEBI has not specified a timeline for the advisory, outlined binding compliance requirements, or indicated penalties. It has also not detailed whether the guidance will be entity-specific or sector-wide, leaving open the possibility of more structured measures later.
The remarks come amid SEBI's broader push for what it describes as optimum and risk-based regulation. Pandey said innovation had played a key role in deepening markets through digital onboarding, faster settlement cycles and new financial products, but stressed that technological progress must be aligned with accountability and market integrity.
He said innovation should ultimately support market stability, investor confidence and long-term capital formation, while ensuring that emerging risks are identified and addressed before they pose systemic threats.
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