The Securities and Exchange Commission (SEC) has ordered Global Predictions Inc., a digital investment adviser, to cease and desist from committing violations of the Investment Advisers Act of 1940. The SEC found that Global Predictions made false and misleading claims about its use of artificial intelligence (AI) and its status as the “first regulated AI financial advisor.”
Global Predictions, based in San Francisco, California, registered with the SEC as an internet investment adviser in August 2023. The company offers non-discretionary investment advice to retail clients through its online platform, PortfolioPilot.com, which provides investment allocation recommendations using algorithms.
The SEC found that since its registration, Global Predictions disseminated misleading information on its website, social media, and in emails to clients and prospective clients. This included false claims about its use of AI technology, its regulatory status, and the services it offered. Global Predictions also failed to substantiate performance claims when requested by the SEC.
Furthermore, the SEC found that Global Predictions failed to disclose material conflicts of interest arising from its relationships with individuals providing testimonials. The company also advertised hypothetical performance on its website without implementing required policies and procedures.
One key violation involved Global Predictions’ advisory contract with clients, which allowed the company to unilaterally change its terms without advance notice. This violated the company’s fiduciary duty to its clients. The contract also included liability disclaimer language that could have misled clients regarding their legal rights.
As part of the settlement, Global Predictions agreed to a censure and to pay a civil money penalty of $175,000. The company also undertook remedial actions, including removing misleading advertisements, conducting compliance training for employees, and revising its advisory contract to provide advance notice of changes.
In accepting the settlement, the SEC considered Global Predictions’ cooperation and remedial efforts. The SEC emphasized the importance of compliance with the Advisers Act and its rules, highlighting the consequences of non-compliance, which can include financial penalties and other sanctions.
Global Predictions did not admit or deny the findings in the SEC’s order, except as to the SEC’s jurisdiction and the subject matter of the proceedings.
