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With the AI \u201cgold rush<\/a>\u201d luring investors into stocks like it\u2019s 1995<\/a> (or even 1999), the Securities and Exchange Commission (SEC) is cracking down on AI pretenders. Chairman Gary Gensler just charged two companies for using \u201cAI washing\u201d in a bid to protect investors from disingenuous marketing claims.\u00a0<\/p>\n The Toronto-based robo-investment advisory firm Delphia and the San Francisco-based online investment advisory firm Global Predictions were both found to have made \u201cfalse and misleading statements about their purported use of artificial intelligence,\u201d according to a Monday SEC press release<\/a>.\u00a0<\/p>\n Delphia was charged after falsely claiming that it used AI to \u201cpredict which companies and trends are about to make it big and invest in them before everyone else,\u201d according to the SEC, while Global Predictions said it was the \u201cfirst regulated AI financial advisor,\u201d among other \u201cfalse and misleading claims.\u201d Both companies settled, agreeing to pay a combined $400,000 in civil penalties.<\/p>\n That\u2019s not a big settlement for the SEC, but it does send a message to companies thinking about lying or stretching the truth to draw in AI investors\u2014and that appeared to be Gensler\u2019s main goal on Monday.<\/p>\n \u201cPublic company execs, they might think that they will enhance their stock price by talking about their use of AI. Well, here at the SEC, we want to make sure that these folks are telling the truth, Gensler said in a follow-up video posted<\/a> to the SEC\u2019s Youtube channel Monday.<\/p>\n Gurbir S. Grewal, the director of the SEC\u2019s Division of Enforcement, echoed Gensler\u2019s comments in a statement, saying the charges against Delphia and Global Prediction should make it \u201cclear\u201d that \u201cif you claim to use AI in your investment processes, you need to ensure that your representations are not false or misleading.\u201d<\/p>\n SEC chair Gensler went on to praise AI as \u201cthe most transformative technology of our time\u201d in his video presentation, but he also warned that too many companies have historically attempted to take advantage of new technologies by lying to investors.<\/p>\n \u201cLet\u2019s face it, when new technologies come along, we\u2019ve also seen time and again false claims to investors by those purporting to use those technologies,\u201d he said, adding that \u201ceveryone may be talking about AI, but when it comes to investment advisors, broker-dealers, and public companies, they should make sure that what they say to investors is true.\u201d<\/p>\n Chair Gensler\u2019s new \u201cAI washing\u201d warning comes the same day that Nvidia<\/a>, which is seen as the darling of the AI era, kicked off its three-day AI conference for developers that some analysts have labeled an AI \u201clovefest<\/a>.\u201d<\/p>\n The SEC\u2019s latest action also follows its January warning about the use of AI marketing to lure investors into scams. \u201cBad actors might use catchy AI-related buzzwords and make claims that their companies or business strategies guarantee huge gains,\u201d the SEC said in its fraud alert<\/a>.<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n<\/div>\n