US SEC Chairman Gary Gensler condemned “AI washing,” or the misuse of artificial intelligence (AI), saying such activities “may violate securities laws.”
Gensler made the statements on March 18 in conjunction with lawsuits and SEC regulatory action against AI washing, which occurs when members of the financial industry make false claims about AI use.
AI wash
Gensler warned that investment advisors and broker-dealers could say they are using AI to get higher returns on their investments. He also suggested that executives at publicly traded companies could try to improve stock prices by discussing their use of AI.
Gensler emphasized that all claims must be accurate, stating:
“Here at the SEC we want to make sure these people are telling the truth. Actually, they should say what they are doing.”
Noting that AI technology has unprecedented transformative potential in a way similar to the internet, Gensler said it is already being used to improve “inclusion, efficiency and user experience” within the financial system.
Two AI settlements
Gensler’s statements come in addition to new AI-related lawsuits and settlements from the SEC.
The SEC settled and settled with Delphia (USA) Inc. and Global Predictions Inc., two investment advisors that made false and misleading statements about their use of AI.
Delphia claimed it used AI in combination with its data to predict which companies are about to ‘go big’ and invest early. Meanwhile, Global Predictions falsely claimed to be the “first regulated AI advisor” and claimed to provide “expert AI-driven predictions.”
In a statement, SEC Enforcement Director Gurbir Grewal said:
“Neither company had the AI capabilities they claim to have… simply put, that’s called AI washing, and it’s hurting investors.”
Delphia and Global Predictions paid $225,000 and $175,000 in civil penalties, respectively, as part of the settlement. The settlement accuses each company of violating the existing Marketing Rule of the Advisers Act and certain other securities regulations.
The SEC previously proposed rules to regulate the use of AI in the financial markets by 2023. However, the proposal has yet to make any substantive progress after facing opposition in the Senate.
Post-SEC Chairman Gensler Condemns ‘AI Washing’ After Regulatory Actions Against Two Companies First Appeared on CryptoSlate.