Thursday, September 23, 2021

Sebi to bank on AI based technology for inspections and surveillance of mutual funds

Bringing better technology to use, the markets regulator, Securities and Exchange Board of India (Sebi) is set to roll-out new technology to automate inspections and surveillance of mutual funds. This is in line with the regulator’s future tech adoption plan to reduce the lag in recognition of violations.

According to Sebi chief Ajay Tyagi, the Sebi is eyeing a major technological leap in its surveillance and investigation functions. “Sebi is in the process of implementing a project on of inspections and surveillance of mutual fund,” Tyagi said in the regulator’s annual report for 2019-20.

Under the new project, mutual fund-related data would be ingested in the Sebi database and use of algorithms in order to generate instances of breaches of regulatory guidelines by mutual funds in respect of several important guidelines where quantitative analysis is possible.

With the new technology in place, Sebi will be able to move towards automation of inspections of mutual funds, 100% inspection of data in place of samples and to reduce the lag in recognition of violation, said the annual report.

Building on better technology, Sebi has also developed an in-house automated system by which it is able to do system based reconciliation of client level securities holdings by brokers thus detecting client securities misuse by brokers if any.

Further, in order to detect possible mark manipulation and strengthen market supervision through technology solutions, Sebi has initiated a “data analytics and data models project.”

Apart from taking steps towards increasing technological sophistication of the markets, Sebi said it has continuously upgraded technology in its own regulatory functions.

The regulator has started work on a data lake project which would have the capability to store and retrieve quickly, a large amount of structured, semi-structured and unstructured data.

The data lake project will support advanced analytical tools, such as artificial intelligence and machine learning (AI/ML), deep learning, big data analytics, pattern recognition, processing of structured and unstructured data, text mining and natural language processing thereby significantly augmenting surveillance capabilities.

Sebi has also implemented its Security and Network Operations Center project which adheres to global security standards to safeguard against the associated risks including cyber frauds in newer technologies.


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