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SEC fines two investment firms for ‘AI washing’

Two investment firms agreed to pay a combined $400,000 in penalties to settle charges that the company made false and misleading statements about their use of artificial intelligence (AI), the Securities and Exchange Commission (SEC) announced Monday.

Neither of the investment companies — Toronto-based Delphia and San Francisco-based Global Predictions — admitted nor denied the civil charges, according to a statement by the SEC, which vowed to crack down on “AI washing.”

“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. 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 in a statement.

Between 2019 and 2023, the SEC said Delphia claimed in SEC filings, in press releases and on its website that it had AI and machine learning capabilities that it did not have. Delphia agreed to pay $225,000 to settle the civil case.

Global Predictions misrepresented its use of AI on its website and social media platforms in 2023, the SEC said, and agreed to pay a $175,000 civil penalty to settle.

“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,” Global Predictions said in a statement.

The Hill has also reached out to Delphia for comment.

“As today’s enforcement actions make clear to the investment industry — if you claim to use AI in your investment processes, you need to ensure that your representations are not false or misleading,” SEC Division of Enforcement Director Gurbir Grewal said in a statement.

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