August 2, 2024
New Delhi, India
The Securities and Exchange Board of India (SEBI) is leveraging artificial intelligence (AI) to enhance the processing of initial public offering (IPO) documents. Speaking at the FICCI 21st Annual Capital Markets Conference, SEBI chairperson Madhabi Puri Buch detailed the integration of AI and its impact on regulatory processes.
AI Implementation in Document Processing:
1. Enhanced Scrutiny with AI: SEBI is using AI to scrutinize annual reports like REIT and InvIT. While SEBI officers validate those reports and perform some manual checks, 80% of the work is done by AI. “For instance, let’s say a REIT annual report or InvIT annual report, earlier what a human being used to read and see whether the annual report is in compliance with our norms, etc., now AI does that. The (SEBI) officer validates it and also does some manual checks, but 80% of the work is done through AI,” said Buch.
2. Fast-Tracking IPO Processes: AI-based processing of IPO documents will naturally fast-track the process. “We have already implemented artificial intelligence within SEBI for processing public documents,” Buch added.
3. Broader Use of Technology: Buch stressed the importance of leveraging technology and innovation. “The theme of technology, which is underlying the entire country today, will continue to drive SEBI and I would urge that all the market participants adopt Regtech, because we are rapidly adopting Suptech. A lot of the supervision we now do, and it’s not just market surveillance, it’s inspection, and all of that, is now using technology,” said Buch.
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New Institutional Developments:
1. Performance Validation Agency: SEBI is coming up with a new institution called the performance validation agency to validate claims related to investment advice. “The market regulator is also coming up with a new institution called the performance validation agency to validate claims related to investment advice,” she mentioned.
2. Innovations in Offer Documents: SEBI is working on two new innovations – a combo product of rights issues and preferential allotments, along with a demystified offer document. “We are developing the technology,” Buch said, adding, “One of the innovations you are going to see very soon, that we have a positive response for is a combo product of a rights issue and a preferential allotment.”
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Proactive Compliance:
1. Emphasis on Proactive Adoption: Buch encouraged companies to proactively adopt innovation and technology. “If you have to be proactive and know what’s happening in your setup before we get to know… If you don’t have the technology, you will be surprised by what we dig up,” she warned.
2. Keeping Pace with Innovation: Buch stressed the importance of keeping regulations up-to-date with market innovations. “Our regulation keeps pace with innovation, otherwise we will be like policemen in Hindi movies…. where after the hero and villain have finished fighting (we will arrive)… (but) we need to arrive at some point,” she remarked.
SEBI’s integration of AI in processing IPO documents marks a significant step towards modernizing regulatory practices in India’s capital markets. With a focus on leveraging technology, SEBI aims to enhance efficiency, reduce processing times, and ensure compliance with regulatory standards. These initiatives underscore SEBI’s commitment to fostering a transparent and innovative market environment.
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