The U.S. Securities and Exchange Commission (SEC) made an announcement today regarding the settlement of charges against two investment advisers, Delphia (USA) and Global Predictions, for disseminating deceptive information concerning the utilization of artificial intelligence (AI) technology in their products.
Both firms have agreed to pay a total of \(400,000 in civil penalties for engaging in "AI washing" practices: Delphia will pay \)225,000, while Global Predictions will pay $175,000.
AI washing is a recent marketing strategy that misleadingly asserts extensive use of artificial intelligence to enhance a company’s offerings when, in reality, the utilization of AI is minimal.
Delphia and Global Predictions have consented to orders to halt any violations or future violations of the Advisers Act and have agreed to discontinue such deceptive practices while settling the charges without admitting or denying the SEC’s findings.
SEC Chair Gary Gensler stated, “We discovered that Delphia and Global Predictions falsely promoted the use of AI to their clients and potential customers,” emphasizing the detrimental impact of misrepresenting AI usage on investors.
Gurbir Grewal, the Enforcement Director, provided further insights into the cases involving the two investment advisers in a statement released by the SEC.
Delphia, a Toronto-based investment firm, allegedly made misleading claims from 2019 to 2023 in its SEC filings, press releases, and marketing materials regarding the integration of AI and machine learning in its investment strategies, purportedly leveraging consumer data.
The SEC determined that Delphia’s assertions about leveraging social data to enhance its AI capabilities for predictive investments lacked credibility. The firm claimed to utilize “shared data” to optimize its artificial intelligence for identifying lucrative companies and trends for investment ahead of the market.
Furthermore, Delphia was accused of breaching the Advertising Rule, which prohibits registered investment advisers from disseminating deceptive advertisements.
On the other hand, San Francisco-headquartered Global Predictions was found to have published false information on its website and social media platforms in 2023, including claims of being the “first regulated AI financial advisor” and offering professional AI-driven forecasts.
Following the investigation, the SEC revealed that Global Predictions had misrepresented its tax-loss harvesting services and included an impermissible indemnity clause in its advisory contract.
In response to these findings, the SEC’s Office of Investor Education and Advocacy issued an investor alert cautioning against potential investment scams related to AI and advising individuals to conduct thorough research before engaging with AI-based financial services.
