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Thursday, April 18, 2024
HomeBusinessSEC fines two firms $400k for deceptive AI practices.

SEC fines two firms $400k for deceptive AI practices.

The Securities and Exchange Commission (SEC) has fined two investment firms a total of $400,000 for engaging in ‘AI washing,’ which involves misleading claims about the use of artificial intelligence in their operations. Delphia (USA) and Global Predictions settled with the SEC, with Delphia agreeing to pay $225,000 and Global Predictions paying $175,000. The companies were accused of falsely promoting their products and services as AI-driven, despite not actually utilizing AI as claimed.

Delphia was found to have falsely stated its use of AI and machine learning in investment strategies and client data usage between 2019 and 2023. The firm admitted in July 2021 that it did not actually use client data for AI purposes, but continued to make misleading statements until August 2023. Global Predictions faced allegations for inaccurately advertising its platform as offering expert AI-driven forecasts, without adequate evidence to support such claims. Both firms also failed to disclose material conflicts of interest related to testimonials and were criticized for compliance failures.

While Delphia has not commented on the settlement, Global Predictions stated that it has cooperated with the SEC’s investigation and has updated its marketing materials to accurately reflect its use of AI. The firm detailed its approach in a blog post and made adjustments to its flagship PortfolioPilot product. This move by the SEC underscores the importance of addressing misleading claims related to AI in the business and investment sectors.

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