Highlights
- The Securities and Exchange Board of India has introduced the Investment Advisers (Second Amendment) Regulations, 2025, which clarifies the responsibilities of investment advisers using Artificial Intelligence tools.
- Investment advisers are now solely responsible for the security, confidentiality, and integrity of client data when utilizing Artificial Intelligence for investment advice.
- The amendment requires investment advisers to disclose the extent of their use of Artificial Intelligence tools in providing investment advice to ensure transparency with clients.
The Securities and Exchange Board of India (Investment Advisers) (Second Amendment) Regulations, 2025 has been notified which brings procedural clarity and addition for ensuring accountability for the investment advisers.
The amendment mandates investment adviser who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing their clients be solely responsible for the security, confidentiality, and integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.
This adds to the general obligation and responsibilities entrusted upon an investment banker under the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013.
The amendment also mandates investment advisers to disclose the extent of the use of artificial Intelligence tools in providing investment advice under regulation 18 ensuring disclosure to the clients.
The regulations were notified in the exercise of the powers conferred by sub-section (1) of section 30 read with clause (b) of sub-section (2) of section 11 of the Securities and Exchange Board of India Act, 1992.
