– Warning from SEC Chief on Deceptive AI Hype and “AI-Washing”

The chair of the Securities and Exchange Commission, Gary Gensler, cautioned publicly traded companies against making exaggerated claims about their use of artificial intelligence, warning that such “AI-washing” practices could not only mislead investors but also violate US securities laws. In a speech at Yale Law School, Gensler emphasized the importance of truthful disclosure regarding the role of AI in a company’s operations and the associated risks, rather than resorting to generic language. He stressed the need for executives to provide specific and accurate information about the use of AI within their businesses, without resorting to falsehoods. Gensler’s remarks underscore a broader effort by regulatory bodies like the Federal Trade Commission to apply existing laws to the realm of artificial intelligence, signaling a crackdown on deceptive practices and potential financial crimes involving AI technologies. The FTC, for instance, has expressed readiness to enforce consumer protection and antitrust laws to combat AI-related scams and fraud. Gensler also highlighted the SEC’s authority to address financial misconduct related to AI, such as securities fraud facilitated by AI tools or actions that jeopardize investor interests. By issuing these warnings, regulatory agencies aim to ensure accountability and compliance within the rapidly evolving landscape of AI technology.