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SEC Charges Two Firms for Misleading AI Claims, Imposes $400K Penalty

The U.S. Securities and Exchange Commission (SEC) charges Delphia and Global Predictions for misleading AI claims, imposing a $400K penalty. Learn about the regulatory scrutiny and settlement in this article.

  • The U.S. Securities and Exchange Commission (SEC) filed charges against Delphia and Global Predictions for misleading statements regarding their use of artificial intelligence.
  • Delphia, a Canadian firm’s U.S. arm, allegedly misled investors from 2019 to 2023 about its AI capabilities, while Global Predictions, based in San Francisco, made deceitful statements in 2023 about being a regulated AI advisor.
  • Both firms agreed to settle the charges and pay a total of $400,000 in civil penalties after the SEC issued a cease-and-desist order.
  • SEC Chair Gary Gensler emphasized the importance of truthfulness in marketing AI capabilities, warning against “AI washing” akin to “greenwashing” in environmental claims.
  • The SEC’s actions signal its vigilance in addressing misleading practices, particularly in emerging technologies like AI.

The U.S. Securities and Exchange Commission (SEC) has taken action against two investment advisors, Delphia and Global Predictions, for allegedly making misleading statements about their utilization of artificial intelligence (AI). According to the SEC, Delphia, the U.S. arm of a Canadian company, purportedly misrepresented its AI capabilities between 2019 and 2023, falsely asserting that its technology employed client data for intelligent investments. Similarly, in 2023, Global Predictions, headquartered in San Francisco, allegedly made deceptive claims about being a regulated AI advisor and providing AI-driven forecasts.

Settlement and Penalties:

Following the SEC’s issuance of a cease-and-desist order, both Delphia and Global Predictions opted to settle the charges, agreeing to pay a combined total of $400,000 in civil penalties. SEC Chair Gary Gensler emphasized the significance of transparency in marketing AI capabilities, condemning the practice of “AI washing,” which entails exaggerating or misrepresenting a company’s reliance on AI technologies. Gensler reiterated that such misrepresentation harms investors and violates securities regulations.

Regulatory Vigilance and Emerging Technologies:

The SEC’s enforcement actions underscore its commitment to combating misleading practices, particularly in nascent technological domains like artificial intelligence. Gensler warned against the dangers of “AI washing,” likening it to the concept of “greenwashing” prevalent in environmental claims. He stressed the importance of ensuring that statements regarding AI capabilities are accurate and truthful, echoing concerns about the proliferation of false claims amidst the growing hype surrounding AI.

Clarifications and Compliance:

In response to the SEC’s inquiry, Global Predictions cooperated fully and expressed satisfaction in resolving the matter. The company’s co-founder and CEO, Alexander Harmsen, emphasized the importance of clarifying its AI usage across marketing channels. Delphia, however, did not immediately respond to requests for comment, leaving questions regarding its compliance and response strategies unanswered.

SEC’s Regulatory Landscape:

The SEC’s regulatory efforts extend beyond traditional financial markets to encompass emerging sectors such as cryptocurrency and artificial intelligence. Recent actions against firms like ShapeShift and Delphia highlight the regulator’s proactive stance in addressing potential violations and safeguarding investor interests. Through enforcement actions and regulatory guidance, the SEC aims to maintain market integrity and foster trust in evolving technological landscapes.



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