Compliance

SEC cracks down on two investment advisors for ‘AI washing’

AI washing gets hung out to dry.
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The Securities and Exchange Commission has a new tool in its arsenal for AI phonies—and it’s finally cracking down.

On Monday, the SEC charged two money managers—Delphia Inc. and Global Predictions Inc.—with making “false and misleading statements” about their AI usage.

“We find that Delphia and Global Predictions marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not,” SEC Chair Gary Gensler said in a statement. Neither company admitted nor denied the SEC’s charges, but both settled and agreed to pay a collective $400,000 in civil penalties. Delphia will pay $225,000, and Global Predictions will fork out $175,000.

In both cases, the charges stemmed in part from misleading statements on the companies’ websites,social media, and/or SEC filings showing just how stringent the SEC plans to be with so-called “AI washing,” or inaccurately listing AI capabilities.

Last September, when the SEC issued an updated rule on factors including greenwashing, Gensler noted that the rule also covered additional “economic themes or investment strategies,” including artificial intelligence.

Now, it’s clear Gensler wasn’t just talking the talk. The two new settlements serve as an industry-wide warning to would-be AI washers—and the SEC wants it that way.

“As more and more investors consider using AI tools in making their investment decisions or deciding to invest in companies claiming to harness its transformational power, we are committed to protecting them against those engaged in ‘AI washing,’” Gurbir Grewal, director of the SEC’s enforcement division, said in Tuesday’s statement. “As today’s enforcement actions make clear to the investment industry—if you claim to use AI in your investment processes, you need to ensure that your representations are not false or misleading.”

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.