SEBI is expanding the use of artificial intelligence in market surveillance, fraud detection and investor protection. Its existing AI systems analyse trading and digital activity to identify suspicious patterns, while the regulator is also developing tools to examine corporate filings for possible financial misstatements and manipulation.
SEBI Expands AI-Based Market Surveillance
The Securities and Exchange Board of India, or SEBI, has been increasing its use of artificial intelligence and data analytics to monitor India’s securities markets. The regulator already uses internally developed AI tools for surveillance and investigation, with AI-generated alerts supporting enforcement work related to trading violations.
This marks a broader shift in how market surveillance is conducted. Traditional surveillance depends heavily on predefined rules, transaction monitoring and investigations. AI can examine much larger datasets and identify relationships or patterns that may require closer scrutiny.
SEBI Executive Director Aliasgar Mithwani said in September 2026 that AI is being used for investigation and surveillance, but stressed that the technology should assist regulators rather than lead supervision on its own. Human oversight therefore remains an important part of the process.
How AI Can Help Identify Suspicious Trading Patterns
Market manipulation can involve unusual trading activity, misleading information, coordinated transactions or attempts to influence the price of a security. Detecting such activity requires regulators to examine large volumes of market data.
SEBI has already developed technology-driven surveillance capabilities for this purpose. According to reporting on the regulator’s AI systems, its internally developed models generate alerts that are used in trading-related enforcement actions. The system has also been enhanced to analyse KYC information and trade-log datasets, identify suspicious patterns and help investigators visualise connections between entities.
The technology does not automatically establish that a trader has committed an offence. Instead, an alert can indicate that activity deserves further examination.
This distinction is important. A large trade, sudden price movement or unusual relationship between accounts can have legitimate explanations. Human investigators still need to examine the circumstances, evidence and applicable regulations before enforcement action is taken.
AI Tools Also Target Digital Investment Fraud
SEBI’s technology strategy extends beyond stock-market transactions. The regulator has developed AI-based tools to monitor digital platforms where investors increasingly obtain financial information.
Project SUDARSAN is designed to identify unauthorised digital activity and fraudulent content, including activity involving people posing as registered investment advisers or research analysts. SEBI has also developed R(AI)DAR, an AI-driven advertisement reviewer intended to identify potential violations in advertisements regulated by the securities watchdog.
The move is significant because financial advice is no longer distributed only through traditional financial institutions. Social media platforms, messaging applications and online video services have created new channels through which misleading investment claims can spread.
For investors in smaller cities and towns, this is particularly relevant. Digital investment platforms have lowered the barriers to participating in financial markets, but they have also made it easier for fraudulent advice and impersonation scams to reach potential investors.
SEBI Plans AI Surveillance for Corporate Filings
SEBI’s next step could take AI-based surveillance beyond trading data.
A Business Standard report in August said the regulator was developing a dedicated AI model to examine quarterly results and corporate filings for possible financial misstatements or manipulation. The objective is to identify potential concerns without relying entirely on investor complaints.
Corporate disclosures contain large amounts of financial and operational information. Analysing these documents consistently can be time-consuming, particularly when regulators need to compare information across multiple reporting periods or companies.
An AI-based system could flag unusual changes, inconsistencies or patterns for further investigation.
However, an alert would still require human verification. Financial statements can change because of legitimate business developments, acquisitions, accounting adjustments or changes in market conditions. AI can identify anomalies, but determining whether an anomaly represents wrongdoing requires regulatory and financial analysis.
Human Oversight Remains Central to SEBI’s Approach
SEBI has repeatedly highlighted the need for responsible AI use in securities markets.
In June 2026, SEBI Chairman Tuhin Kanta Pandey said AI could strengthen surveillance, risk assessment, fraud detection and investor servicing, while also creating risks involving opacity, bias, data protection, cybersecurity and accountability. The regulator has been working on a framework for responsible AI use in capital markets.
In August, Pandey said SEBI would issue guidelines for responsible AI and machine learning use in the securities market. The proposed approach includes safeguards such as human oversight and controls around AI systems.
This approach reflects a wider concern in financial regulation: the same technology that can improve fraud detection can also introduce new risks if its decisions cannot be properly explained or challenged.
What AI Surveillance Means for Retail Investors
For retail investors, stronger surveillance can provide another layer of protection against market abuse. Faster identification of suspicious trading patterns can help regulators investigate potential violations more quickly.
The benefit can be particularly relevant as more Indians participate in the securities market through online brokers and investment platforms.
SEBI’s recent enforcement activity shows that market manipulation remains an active regulatory concern. Its September 2026 orders include an interim order involving alleged cross-segment price manipulation, while earlier enforcement actions have covered insider trading, illiquid stock options and manipulation through social media.
At the same time, AI surveillance does not remove the need for investors to exercise caution. Investors should continue checking whether financial advisers and intermediaries are properly registered and avoid making investment decisions based solely on social media posts, unsolicited messages or promises of guaranteed returns.
AI Is Becoming Part of India’s Regulatory Infrastructure
SEBI’s use of AI represents a wider transformation in financial regulation. Market infrastructure has become increasingly technology-driven, and regulators now need systems capable of analysing information at comparable scale.
SEBI’s own technology roadmap recognises AI and machine learning as important components of future market infrastructure. In a June 2026 address, Pandey said technology would be a major pillar of the roadmap and highlighted the importance of secure AI with a human-in-the-loop approach for surveillance and other market functions.
The direction is therefore not simply about replacing manual surveillance with algorithms. It is about combining large-scale data analysis with regulatory expertise.
For India’s growing investor base, that could mean faster identification of suspicious activity, closer monitoring of digital investment fraud and greater scrutiny of corporate disclosures. But the effectiveness of these systems will ultimately depend on the quality of their data, the transparency of their processes and the human oversight surrounding them.
Key Takeaways
- SEBI already uses AI-based systems to support market surveillance and investigation.
- AI tools can identify suspicious trading patterns and digital investment fraud for further regulatory examination.
- SEBI is developing additional AI capabilities to examine corporate filings and identify potential financial misstatements.
- Human investigators remain essential because an AI alert does not by itself establish market manipulation or fraud.
Frequently Asked Questions
What is SEBI using AI for?
SEBI uses AI and data analytics for functions including market surveillance, fraud detection, digital activity monitoring, advertisement review and investigation support.
Can AI automatically identify market manipulation?
AI can identify unusual patterns and generate alerts, but an alert does not automatically establish manipulation. Regulatory officials must examine the underlying evidence and circumstances.
What is Project SUDARSAN?
Project SUDARSAN is an AI-powered SEBI surveillance initiative focused on unauthorised digital activity and potential financial fraud, including misleading activity on social media.
Will SEBI’s AI systems replace human regulators?
SEBI’s stated approach is to use AI as an assistive technology rather than replace human regulatory judgment. Human oversight and accountability remain central to its approach.
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