Front-running Patterns Identified in PMS Using AI Tools

The Securities and Exchange Board of India (SEBI) is implementing advanced artificial intelligence (AI) tools to enhance market surveillance operations. These sophisticated technologies are designed to generate actionable alerts for regulators, allowing for more effective monitoring of market activities. Recent data from these AI-driven alerts indicates potential instances of front-running within the Portfolio Management Services (PMS) sector, where financial professionals may trade on non-public information to gain advantages over clients.

In response to these findings, SEBI is adopting a proactive and supportive approach to compliance and resolution. This initiative aims not only to strengthen regulatory oversight but also to promote greater awareness among market participants regarding the importance of ethical trading practices. By addressing these concerns, SEBI seeks to mitigate negative perceptions among investors and uphold the integrity of the financial markets.

As part of its ongoing efforts, SEBI is expected to continue refining its use of technology in surveillance, while also engaging with industry stakeholders to improve compliance frameworks and enhance investor protection measures. The regulator’s commitment to leveraging AI reflects a broader trend within financial regulation to harness technology for more effective governance.