The Securities and Exchange Board of India (Sebi) is set to issue an advisory flagging risks from next-generation artificial intelligence (AI) models and AI-led vulnerability detection tools, amid rapid advances that could disrupt the financial services ecosystem.

Sebi chairman Tuhin Kanta Pandey indicated that increasingly powerful AI systems—including models such as Claude Mythos — can both strengthen and undermine market resilience. "These tools can identify weaknesses faster, but can also exploit vulnerabilities at speed and scale. In an interconnected securities market, a single weak link can create wider risks," he said at the IMC Capital Markets conference in Mumbai on Monday.

Pandey stressed the need for regulated entities to bolster cyber resilience through continuous monitoring and quicker remediation. He added that Sebi is in active engagement with market participants and stakeholders, and will "soon issue an initial advisory" addressing risks from advanced AI systems and AI-driven detection capabilities.

On commodity derivatives, Pandey indicated that sectoral regulators remain cautious. "Banks and insurance companies — their respective regulators (RBI and Irdai) are not very favourably inclined to allow investments in commodity derivatives, and they have a valid rationale," he said during a fireside chat. The pension regulator has also examined permitting such exposure for pension funds, but did not disclose any decision.

Separately, Pandey said progress on a centralised know-your-customer (KYC) framework is expected by June, to enable a single, interoperable KYC across the financial sector. He flagged authentication as the key bottleneck, warning that without robust verification, pooled data could become "untrustworthy". Stronger coordination among regulators will be critical to building a reliable system, he added.

Earlier, at Sebi’s foundation day event, finance minister Nirmala Sitharaman had urged the regulator to take the lead in developing comprehensive CKYC norms.

Sebi on Monday proposed a series of changes to norms governing securitised debt instruments (SDIs), including allowing single-asset securitisation by RBI-regulated entities, winding up of securitisation transactions and easing certain structural restrictions to boost market development.