SEBI AI Detects Front Running In Portfolio Management Services Industry

CHENNAI — The Securities and Exchange Board of India (SEBI) announced on Friday in Chennai that its artificial intelligence systems have detected patterns indicating front-running activities within the portfolio management services (PMS) industry.

Speaking at the Association of Portfolio Managers in India (APMI) PMS Leadership Conclave 2026, Manoj Kumar, Executive Director of SEBI, revealed that the regulator's AI capabilities have been extensively deployed and are generating an increasing number of actionable alerts. These technological alerts have helped the regulator uncover patterns of front-running in the PMS sector, a practice SEBI previously believed was largely confined to mutual funds.

“Recently, we have noticed our AI generating enough alerts, and over a period of time, the patterns emerging from those alerts suggest that a certain amount of front-running is also happening in the PMS industry,” Kumar said during the conclave. “We always believed this was something largely confined to the mutual fund space. But of late, we have observed that it is happening in PMS as well. We are analysing how it has impacted investors.”

In response to these findings, Kumar stated that SEBI is adopting a “handholding” approach towards compliance and resolution. The regulator intends to remain accommodative and supportive of portfolio managers when dealing with unintended compliance violations.

“We always see that when you operate, there can be some unintended violations. As long as these violations remain unintended, we are very, very accommodative. We will listen to your viewpoint,” Kumar explained.

However, the Executive Director stressed that the regulatory objective is to establish greater awareness across the PMS industry. SEBI aims to discourage any trading activities that could be perceived as even remotely impermissible or viewed negatively by the investing public.