SEC sues money managers for bogus artificial intelligence claims

THE US Securities and Exchange Commission penalised two money managers for what it says were bogus claims about their use of artificial intelligence (AI), stepping up a crackdown by Wall Street’s main regulator.

The SEC said on Monday (Mar 18) that Delphia (USA) and Global Predictions both made “false and misleading statements” about their purported use of the technology. Lawyers for each of the investment advisers did not immediately respond to requests for comment.

SEC chair Gary Gensler has been warning firms about over-hyped statements related to AI. The agency has specific authorities to oversee statements that money managers make to investors. In February, Gensler also warned publicly traded companies to avoid “AI washing” when talking to investors about their use of the technology.  

The SEC alleged on Monday that Toronto-based Delphia made false statements about how it was using machine learning in its investment process from 2019 to 2023. Global Predictions, based in San Francisco, also made misleading claims such as that it was the “first regulated AI” financial adviser and other statements.

Neither firm admitted or denied the SEC’s allegations in settling their cases. Delphia agreed to pay US$225,000 and Global Predictions US$175,000.

Companies from a range of industries have been advertising how they are using AI to improve operations. More than 40 per cent of S&P 500 companies discussed the technology in their annual reports to the SEC, according to a recent Bloomberg Law analysis. Financial firms are also harnessing the technology in everything from lending to trade recommendations. BLOOMBERG

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