India’s Markets Regulator Prepares Advisory on AI Risks for Market Intermediaries
India’s markets regulator, the Securities and Exchange Board of India, will soon release an advisory warning market intermediaries about emerging risks from artificial intelligence tools, including Anthropic’s Mythos model, Reuters reported on May 4. The advisory targets brokers, asset managers, and other regulated participants who have begun integrating AI into trading, client communications, and compliance workflows.
SEBI has not published the document yet, but the regulator’s intention to act makes India one of the first major emerging-market regulators to formally address AI risk in financial services.
What the Advisory Is Expected to Cover
The Reuters report does not specify every element SEBI’s advisory will address, but the regulator’s framing centers on risks that arise when AI systems make or influence financial decisions without adequate human oversight. Those risks include model hallucinations producing incorrect trading signals, confidentiality breaches when client data enters third-party AI systems, and liability gaps when algorithmic outputs cause client losses.
Anthropic, the AI safety company behind the Claude and Mythos model families, has seen adoption grow rapidly among institutional clients in Asia through early 2026.
Indian brokerages and wealth managers have been among the early adopters. SEBI’s advisory appears timed to get ahead of systemic risk before AI-driven errors accumulate to a scale that triggers market disruption.
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Background
SEBI has a precedent for technology-specific guidance.
The regulator issued algorithmic trading circulars in 2012 and 2021 that imposed co-location restrictions and audit requirements on firms using automated systems. Those earlier rules addressed speed and fairness.
The new advisory shifts the focus to the accuracy and accountability of AI-generated outputs, a different class of risk. Globally, the SEC in the United States flagged AI conflicts of interest in investment advice in 2023, and the European Union’s AI Act came into force in stages through 2025, making financial services a high-risk category requiring documentation and human oversight.
India’s move positions SEBI alongside the SEC and EU regulators in treating AI as a systemic concern rather than a purely operational one.
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What Comes Next
Market intermediaries in India should expect the advisory to arrive within weeks, based on SEBI’s “soon” framing to Reuters.
The document is likely to be non-binding in its first form, setting out recommended practices rather than hard compliance requirements. That pattern matches how SEBI introduced its earlier algorithmic trading guidance before converting best-practice recommendations into enforceable rules.
Brokerages using AI for client-facing decisions will want to begin documenting their model governance before formal requirements land.
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