The Securities and Exchange Commission (SEC) has taken action against companies engaging in what it terms as 'AI washing.' In a recent announcement, the agency disclosed that two investment advisers have agreed to pay substantial fines after being accused of making false and misleading statements regarding their utilization of artificial intelligence (AI). Delphia (USA) and Global Predictions, the firms in question, have settled with the SEC, with penalties amounting to $225,000 and $175,000, respectively.
SEC Chair Gary Gensler had previously cautioned investors about deceptive claims surrounding AI usage and highlighted the potential risks AI poses to financial stability. Gensler emphasized the need for transparency, stating that investment advisers should refrain from misleading the public by falsely claiming to employ AI models.
Delphia, based in Toronto, allegedly misrepresented its use of AI and machine learning to identify promising companies and trends for early investment, a claim refuted by the SEC. Similarly, Global Predictions faced charges for asserting that they were the first regulated AI financial advisor and provided expert AI-driven forecasts, claims that the SEC found to be unsubstantiated.
Both Delphia and Global Predictions settled with the SEC without admitting or denying the agency's findings. The SEC's actions come amidst a surge in AI adoption across various sectors, prompting increased regulatory scrutiny. In January, the SEC issued an investor alert cautioning against AI-related investment fraud, warning individual investors about the risks associated with fraudulent schemes leveraging the allure of AI technology.
