Investment advisers plead guilty to AI washing

SEC has settled charges against two advisers for purporting to use AI and misleading the public.

Delphia and Global Predictions agreed to settle the Securities and Exchange Commission (SEC) charges and pay $400,000 in civil penalties.

Both companies were accused of so-called AI washing – pretending to use AI when, in fact, it was just bait.

"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," said SEC Chair Gary Gensler.

Companies shouldn't pretend they use AI when they don't.

"Such AI washing hurts investors," Gensler added.

Investors are increasingly looking for signs of a company using AI before making an investment decision. Therefore, some firms simply market themselves as AI companies to attract more investments.

According to the SEC, Toronto-based Delphia claimed it "put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else."

These statements were deemed false as the firm didn't have the AI and machine learning capabilities it claimed.

San Francisco-based Global Predictions bragged on its website about its purported use of AI, pretending to be the "first regulated AI financial advisor."

Delphia and Global Predictions agreed to pay a civil penalty of $225,000 and $175,000, respectively.

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