”We are working on the question of misselling that may happen by a mutual fund distributor or an agent or by someone who is the responsibility of the mutual fund,” Madhabi Puri Buch said while speaking at the fourth Global Fintech Fest
Sebi has proposed a consolidated framework, wherein all regulated entities need to put in place an up-to-date cyber crisis management plan
Mumbai:
Markets regulator Sebi is building an artificial intelligence tool to help detect misselling by mutual funds, its Chairperson Madhabi Puri Buch said on Tuesday.
She cited a recent incident of a 90-year-old being sold a product with a seven-year lock-in period to illustrate an instance of misselling, and said algorithms will help flag such cases.
”We are working on the question of misselling that may happen by a mutual fund distributor or an agent or by someone who is the responsibility of the mutual fund,” Buch said while speaking at the fourth Global Fintech Fest here.
She admitted that this is a very complex problem requiring intelligence, and added that the algorithm being built will have the essential tools to detect misselling like flagging the case of a 90-year-old being sold the product with a long lock-in period.
At present, mutual funds submit essential data to Sebi periodically with respect to compliance with regulations. A ”nil report” is considered the best, Buch said.
At the same time, Buch said there may be misselling that may go unnoticed in the rule-based supervision and those same will be detected with the AI tool.
”As we move to using AI to analyse the data, we hope that we will also find the ability to monitor these things (misselling) in the interest of the investors,” she said.
The Sebi is addressing cybersecurity risks and averting cyber attacks at stock exchanges and clearing corporations to strengthen market infrastructure, Buch said.
“We have a mechanism in the works and it’s in the process of implementation…every client whose broker’s server goes down, will have direct access to exchanges to manage risk reduction and close out his position,” Buch said while speaking at the Global Fintech Fest.
Last week, the capital market regulator announced new guidelines to strengthen the existing cyber security and cyber resilience framework for stock exchanges, clearing corporations, and depositories.
Sebi has proposed a consolidated framework, wherein all regulated entities need to put in place an up-to-date cyber crisis management plan.
The framework has been mooted to further strengthen the cyber risks, incident prevention, preparedness, and response capacities of the entities.
Meanwhile, Buch said the regulator is also keen to introduce fractional ownership of shares but the current legal set up does not allow it.
”Somebody came with that (idea) and we thought it was good… we would have wanted to welcome them into the innovation sandbox but it is not permitted in the Sebi Act itself.
”It cannot be done until we change the Act — not just the Sebi Act, but also the Companies Act,” she said.