The SEC is cracking down on investment advisers that falsely claim to use AI

• The SEC is cracking down on investment advisers is says falsely claim to use AI.
• The agency settled with two advisers, Delphia and Global Predictions, who agreed to pay fines of $225,000 and $175,000, respectively.
• "Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors," SEC chair Gary Gensler said.

The SEC is beginning to crack down on companies it says are "AI washing."

In a release on Monday, the agency announced that they had settled with two investment advisers, who agreed to pay six-figure fines after being charged with "making false and misleading statements about their use of artificial intelligence."

The firms, Delphia (USA) and Global Predictions, agreed to pay penalties of $225,000 and $175,000 respectively.

The decision arrives about a month after SEC chair Gary Gensler warned investors about misleading claims of AI use and highlighted the potential risks of AI to financial stability.

"We've seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies," Gensler said per the release. "Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors."

Delphia, a Toronto-based firm, was charged for saying they used AI and machine learning to figure out which companies and trends would take off and invest in them before everyone else, which the SEC claimed was false. Global Predictions was charged for saying they were the "first regulated AI financial advisor" and that they provided "[e]xpert AI-driven forecasts" — claims also disputed by the SEC.

The release also noted that Delphia and Global Predictions settled without admitting or denying the SEC's findings.

As the AI hype multiplies and sweeps across all industries, it's gathering increasing scrutiny from the government watchdog. The SEC issued an investor alert in January, warning about AI and investment fraud.

"Individual investors should know that bad actors are using the growing popularity and complexity of AI to lure victims into scams," the alert said.