In a recent statement, US SEC chair Gary Gensler expressed concern over the growing trend of “AI washing” in the financial sector. He emphasized that such activities not only mislead investors but may also violate securities laws. Gensler pointed out that some investment advisers and broker-dealers are falsely claiming to use AI to generate higher returns on investment, while executives at publicly traded companies are exaggerating the benefits of AI to boost stock prices.
Gensler highlighted the transformative potential of AI in the financial system, comparing it to the impact of the internet. He noted that AI technology is already being used to enhance inclusion, efficiency, and user experience within the industry. However, he stressed the importance of transparency and accuracy in all claims related to AI to maintain trust and integrity in the market.
The SEC recently took legal action against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their use of AI. Delphia claimed to use AI for predicting profitable investments, while Global Predictions falsely labeled itself as the “first regulated AI advisor” offering expert forecasts. Both companies agreed to pay civil penalties as part of the settlement and were charged with violating securities regulations.
SEC Enforcement Director Gurbir Grewal criticized the firms for falsely claiming AI capabilities they did not possess, labeling it as “AI washing.” He highlighted the negative impact of such practices on investors and emphasized the need for stricter enforcement measures to prevent further deception in the market. The SEC’s crackdown on AI washing is a step towards maintaining transparency and accountability in the financial sector.
Despite the SEC’s efforts to address the misuse of AI in financial markets, proposed regulations to regulate AI use have faced obstacles in making substantial progress. The opposition in the Senate has delayed the implementation of these rules, leaving room for continued exploitation of AI technology for deceptive purposes. It is crucial for regulatory bodies to work towards implementing effective safeguards to protect investors and ensure the integrity of the financial system.
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