Amid growing use of Artificial Intelligence (AI) and concerns around newer AI models like Anthropic’s Mythos, Securities and Exchange Board of India plans to issue an advisory around it.
“Sebi is in constant touch with market participants and relevant stakeholders as the latest challenge after Mythos, and similar AI models tests our resilience. Sebi will soon issue an initial advisory on risks emenating from such models, and AI-led vulnerability detection tools,” said Tuhin Kanta Pandey, the chairman of Sebi.
Anthropic’s Claude AI model is said to be the most advanced model around cyber security and therefore has been on radar of global financial regulators off-late. Anthropic has itself warned that the model is too dangerous for public release given its advanced capabilities related to analysing systems and identifying “zero-day” vulnerabilities.
Finance Minister Nirmala Sitharaman also held a meeting recently with top officials at various banks around potential risks with Mythos.
Sebi sees the need for stakeholders to be alert on the vulnerabilities around AI. Pandey pointed that Mythos was not widely available yet, but it still showed up grave risks.
“Therefore it’s very important for market players and others to use whatever tools they have to see they are proactive, find out vulnerabilities themselves and patching them up,” he stated.
Speaking at a capital markets summit organised by IMC, Pandey addressed various issues, including the challenges around having one KYC (know your customer) across the sector, whether securities, banking insurance and pension.
He noted that common KYC had already been implemented in segments like securities where, one needs to do a KYC only once, and then it can be simply downloaded through a KRA system.
But, according to Pandey there have been issues when it came to central KYC, used in banking.
“In CKYC 1.0 there were not, there were no very clear authentication principles. When you are bringing the data into the central KYC pool, if the data is not fully authenticated, then it becomes in one sense untrustworthy,” he pointed.
The issues should get addressed with CKYC 2.0, which is under preparation. Pandey said meetings have been held with CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) on identifying different points that need to be addressed.
The key was to ensure that whatever info was being gathered, was well authenticated, he said. All the regulators needed to sit together to see one KYC becomes a reality, he added. There may be something on CKYC 2.0 by July, noted Pandey.
FII sell-off
The Sebi chairman also touched upon the issue of the massive selling that has been seen in the equities market by foreign portfolio investors. According to Pandey, the regulator has taken several measures with respect to ease of doing business and providing a liquid, trusted market for foreign investors. For instance, Sebi recently allowed net settlement of funds for FPIs in the cash market.
However, Pandey pointed that post-tax returns in US dollars was what would also guide the behavior of foreign investors.
“They would also look at it what kind of sectors they are interested in on the margin. And if those sectors are not very vibrantly present in Indian market, they would move elsewhere and they can come back because those sectors are also getting built up in India, ” he stated.
