The U.S. Securities and Exchange Commission (SEC) announced penalties for investment advisers, Delphia (USA) and Global Predictions, for misleading statements about their use of artificial intelligence (AI) technology in their products. Both companies have agreed to pay $400,000 in civil penalties for engaging in “AI washing,” a practice of falsely claiming AI utilization when it’s minimal. Delphia faces a $225,000 penalty, while Global Predictions will pay $175,000.
Delphia, based in Toronto, allegedly misrepresented its use of AI and machine learning in investment strategies from 2019 to 2023, claiming to enhance predictive investing with collective data. The SEC found these claims lacked substance, as Delphia purported to make its “artificial intelligence smarter” based on collective data for predicting market trends. Similarly, Global Predictions, headquartered in San Francisco, made deceptive statements on its website and social media platforms in 2023, falsely portraying itself as the “first regulated AI financial advisor” and offering “expert AI-driven forecasts.”
Both firms were found to have violated SEC regulations by disseminating false or misleading advertisements about their AI capabilities. In response, the SEC’s Office of Investor Education and Advocacy issued an investor alert, cautioning against potential investment fraud related to AI and urging investors to exercise due diligence when engaging with AI-based financial services. The penalties underscore the SEC’s commitment to ensuring transparency and accuracy in the representation of AI technologies in the financial industry.
