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Federal regulators have taken action against two investment advisers, accusing them of making fraudulent assertions regarding their use of artificial intelligence (AI).
Delphia and Global Predictions have reached settlements with the Securities and Exchange Commission (SEC), agreeing to pay a combined total of $400,000 in civil penalties, as announced by the regulator on Monday (March 18).
SEC Chair Gary Gensler emphasized the importance of transparency, stating, “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. Such AI washing hurts investors.”
The SEC alleges that Toronto-based Delphia made false or misleading statements between 2019 and 2023 about its incorporation of AI and machine learning to forecast promising investment opportunities.
Similarly, San Francisco-based Global Predictions purported to be the “first regulated AI financial advisor” and claimed to offer “expert” AI-driven forecasts, according to the SEC. Both companies neither admitted nor denied wrongdoing but agreed to the SEC’s findings that they breached the Advisers Act.
A spokesperson for Global Predictions stated, “Global Predictions cooperated fully with the inquiry and is pleased to put this behind us. Additionally, we have clarified across our marketing how exactly we use AI.”
Furthermore, the company clarified its AI usage and repositioned its PortfolioPilot as “Your Personal AI Financial Advisor.”
The SEC had previously cautioned against making false AI claims, with Gensler referring to the practice as “AI washing,” akin to “greenwashing” for environmental records.
In response to these warnings, the agency reportedly initiated inquiries into several investment advisers regarding their AI utilization, as reported by The Wall Street Journal.
As regulatory scrutiny intensifies, transparency and accuracy in AI-related claims become increasingly crucial for maintaining investor trust and regulatory compliance.
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