SEC Enforcement Action on AI Marketing Disclosures
What Happened?
Today, the SEC settled charges against two investment advisers for a total of $400,000 in penalties. These firms were accused of making false and misleading statements about their use of artificial intelligence. One falsely claimed to use collective data to enhance its AI predictions, while the other misrepresented itself as the “first regulated AI financial advisor.” Let’s dive in:
Key Takeaways
RIA #1:
Made false and misleading statements in SEC filings and on its website regarding their use of AI from 2019 to 2023.
Even though the adviser did not have AI capabilities, they claimed that they put “collective data to work to make [their] artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else”.
Agreed to pay a $225,000 penalty.
RIA #2:
Made false claims in 2023 on their website and social media about being the “first regulated AI financial advisor”.
Misrepresented their platform’s capabilities by stating the platform provided “expert AI-driven forecasts”, when in fact it did not.
Agreed to pay a $175,000 penalty.
CCG’s Guidance
Investment advisers should review their marketing disclosures to ensure accurate representations about their use of AI and its capabilities.
The SEC remains committed to preventing “AI washing” and maintaining trust in the industry.
Transparency and reliability in disclosures are crucial for investor protection.
In an ever-changing regulatory landscape, preparation is key. The SEC’s focus on artificial intelligence serves as a reminder of the volume, velocity, and complexity of the new regulation promulgation.
The Chenery Compliance team is here to help you navigate these changes and ensure your firm is prepared for the inevitable SEC exam.
If you're looking to enhance your compliance program, contact us to learn more about how we can help you!