The Securities and Exchange Commission (SEC) announced today that it has settled charges against investment advisers Delphia (USA) Inc. and Global Predictions Inc. for making false and misleading statements about their use of artificial intelligence (AI). The firms agreed to pay a total of $400,000 in civil penalties.
The SEC found that both firms marketed their services by claiming to use AI in certain ways when they were not actually doing so. SEC Chair Gary Gensler emphasized the importance of transparency, stating that misleading the public about the use of AI hurts investors. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, echoed this sentiment, noting that investors deserve protection from firms engaged in “AI washing.”
According to the SEC’s order against Delphia, the Toronto-based firm made false statements in its SEC filings, press releases, and website regarding its use of AI and machine learning in its investment process. The SEC found that Delphia did not have the AI capabilities it claimed and violated the Marketing Rule by disseminating untrue statements of material fact.
In the case of Global Predictions, the SEC found that the San Francisco-based firm made false claims on its website and social media about being the “first regulated AI financial advisor” and offering AI-driven forecasts. The SEC also found that Global Predictions violated the Marketing Rule by falsely claiming to offer tax-loss harvesting services and including an impermissible liability hedge clause in its advisory contract.
Without admitting or denying the SEC’s findings, both Delphia and Global Predictions consented to orders finding that they violated the Advisers Act. They were censured and ordered to cease and desist from violating the charged provisions. Delphia agreed to pay a civil penalty of $225,000, and Global Predictions agreed to pay a civil penalty of $175,000.
The SEC’s Office of Investor Education and Advocacy issued an Investor Alert about artificial intelligence and investment fraud. The investigations were conducted by the Division of Enforcement’s Asset Management Unit, with assistance from the Division of Examinations and the Division’s Office of Risk and Strategy.
