Regulators in India and US target AI risks in markets

Regulators in India and the United States are developing frameworks to manage the risks associated with artificial intelligence and machine learning in financial and consumer markets.

In India, the Securities and Exchange Board of India (SEBI) is preparing guidelines for the responsible use of AI and ML in the securities market. The proposed framework will utilize a tiered approach based on risk levels and will incorporate human oversight, enhanced data controls, and kill-switch mechanisms to halt systems behaving abnormally. This follows a previous circular requiring mutual funds to report on their use of AI applications for operations, investment strategies, or compliance.

In the United States, the Federal Trade Commission (FTC) has released a draft enforcement statement targeting personalized pricing driven by AI. The policy focuses on the use of personal data to set prices based on an individual's perceived willingness to pay. While the FTC lacks the statutory authority to ban personalized pricing, the draft requires companies to disclose when prices are personalized, the basis for such pricing, and the specific data types used, aiming to prevent deceptive practices under Section 5 of the FTC Act.