The use of Artificial Intelligence (AI) tools in research services is increasing rapidly. SEBI has recognized this trend and introduced specific requirements for Research Analysts (RAs) using AI tools. This article provides a comprehensive technical analysis of the disclosure and liability requirements for RAs using AI tools.
Regulatory Basis
Primary Provisions
Regulation 19(vii) provides that:
"A research analyst or research entity shall disclose to the client the extent of use of Artificial Intelligence tools in providing research services."
Regulation 24(7) provides that:
"A research analyst or research entity who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing its clients shall be solely responsible for the security, confidentiality and integrity of the client data, use of any other information or data for research services, research services based on output of Artificial Intelligence tools and compliance with any law for the time being in force."
AI Disclosure Requirements
What Must Be Disclosed
| Disclosure Item | Description |
|---|---|
| Extent of Use | Whether AI tools are used and to what extent |
| Purpose | What AI tools are used for |
| Data Usage | What client data is used with AI tools |
| Security Measures | What security measures protect client data |
| Liability | RA's responsibility for AI outputs |
When to Disclose
| Scenario | Timing |
|---|---|
| New Clients | At the time of disclosing terms and conditions |
| Existing Clients | By April 30, 2025 |
| Changes in AI Use | Whenever required |
Where to Disclose
| Location | Include? |
|---|---|
| Terms and Conditions | Yes |
| Client Communications | Yes |
| Website | Yes |
| Research Reports | Yes |
AI Liability Requirements
1. Sole Responsibility
RAs are solely responsible for:
- Security: Protection of client data.
- Confidentiality: Maintaining confidentiality of client data.
- Integrity: Maintaining integrity of client data.
- Use: Use of information or data for research services.
- Output: Research services based on AI output.
- Compliance: Compliance with any law for the time being in force.
2. Scale and Scenario Agnostic
The liability applies regardless of:
- The scale of AI adoption.
- The scenario of AI adoption.
- The extent of AI use.
3. No Delegation of Responsibility
RAs cannot delegate responsibility for AI tools to third parties.
Practical Implementation
AI Disclosure Sample
"Disclosure on the Use of Artificial Intelligence Tools:
[Name of RA/Research Entity] uses Artificial Intelligence (AI) tools in the provision of research services. The AI tools are used for [purpose, e.g., data analysis, pattern recognition, report generation]. The extent of AI use is [description of extent].
[Name of RA/Research Entity] is solely responsible for:
- The security, confidentiality, and integrity of client data used with AI tools.
- The use of any information or data for research services.
- Research services based on the output of AI tools.
- Compliance with any law for the time being in force.
Clients may contact [Contact Person] at [Email] or [Phone] for more information about our AI tools and their use in research services."
Common Compliance Gaps
1. No AI Disclosure
Some RAs using AI tools fail to disclose this to clients.
Solution: Disclose AI use to all clients.
2. Incomplete Disclosure
Some RAs provide incomplete disclosure on AI use.
Solution: Provide comprehensive AI disclosure.
3. Assuming No Liability
Some RAs assume they are not liable for AI outputs.
Solution: Understand and acknowledge liability.
4. Not Updating Disclosure
Some RAs fail to update AI disclosure when AI use changes.
Solution: Update AI disclosure whenever AI use changes.
Conclusion and How Anuj Desai & Associates Can Help
AI tools offer significant benefits but come with compliance obligations. RAs must disclose AI use and accept liability for AI outputs.
Anuj Desai & Associates offers specialized services to help RAs comply with AI disclosure and liability requirements:
- Review of AI tools and processes.
- Development of AI disclosure templates.
- Compliance audit and advisory.
Contact us today to ensure your AI tools comply with SEBI requirements. Our team will review your AI use and provide a tailored compliance roadmap.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.