SEC Announces Enforcement Actions Against “AI-Washing” Advisers

On March 18, the Securities and Exchange Commission announced an enforcement action against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their use of artificial intelligence (AI). In the Commission’s order against Delphia, the SEC alleged that Delphia made false and misleading statements in its filings, a press release, and on its website regarding its use of AI and machine learning in its investment process. In the order against Global Predictions, the Commission alleged that the adviser made false and misleading statements about its use of AI including “the firm falsely claimed to be the ‘first regulated AI financial advisor’ and misrepresented that its platform provided ‘[e]xpert AI-driven forecasts.’” The Commission also found that Global Predictions and Delphia violated the Marketing Rule through false claims in their advertising documents. Delphia agreed to pay a civil penalty of $225,000, and Global Predictions agreed to pay a civil penalty of $175,000.

Click here to read the Commission’s press release on the Enforcement action.
Click here to read a client alert from Ropes & Gray covering the Enforcement action.