SEC Has Charged Two Advisers $400,000 For Exaggerating AI Investment Strategies
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The US Securities and Exchange Commission (SEC) has charged two investment advisory companies $400,000, according to the latest announcement.
Global Predictions Inc. and Toronto-based Delphia (USA) Inc. were fined for fake and deceptive claims about utilizing artificial intelligence in their investments. Both firms have agreed to pay the $400,000 in total settlement.
The SEC mentioned that the two companies exaggerated their AI capabilities to customers and potential investors. According to the agency’s order, between 2019 and 2023, Delphia issued inaccurate statements to its users.
Delphia’s statement highlighted the possibility of using machine learning and AI to predict investment outcomes on its website, releases, and filings. However, the SEC discovered that Delphia did not showcase the asserted AI capabilities.
Both Firms Accepted the SEC’s Fines Without Accepting Or Denying The Charges
The SEC order revealed that Global Predictions false claims about providing tax-loss harvesting services. It was also clear that the company added a prohibited liability exemption on its advisory contracts. Global Predictions pledges to pay a $175,000 civil penalty, while Delphia will pay $225,000. Both firms accepted the cease-and-desist orders and censures without denying or admitting the findings.
Gary Gensler, SEC’s Chair, revealed that several times, when new technologies are launched, they spark interest from investors. Moreover, they also bring fake propagated claims from those individuals who utilize these technologies. Investment advisers should avoid misguiding the public by falsely declaring that they are using the AI model, Gensler mentioned.
The Director of the SEC’s Enforcement Division, Gurbir S. Grewal stated that many investors are considering the use of AI tools to make certain investment decisions. They also want to place their investments in firms claiming to leverage its transformative potential. The SEC is dedicated to protecting these investors against those companies engaged in AI washing, Grewal said.
The SEC Advises Investment Firms Planning To Use AI To Operate Candidly
The latest regulatory measures send a vital message to the investment industry. For any company that claims to utilize artificial intelligence in their investment proceedings, those claims must be true and not misleading.
Additionally, public issuers claiming to adopt artificial intelligence must stay vigilant about similar fabrications that could influence people’s investment choices.
The SEC took its action two months after the CFTC, another US regulatory agency, gave a warning to investors about investment schemes involving AI. According to the regulatory agency, fraudsters Utilize AI by promising high returns via the use of crypto-asset arbitrage, signals, and trading bots.
Recently, investors and the SEC encountered difficulties. The regulatory authority saw its website disappear from the internet for many hours. According to a report last week, the SEC.gov address wasn’t responsive for six hours.
