Advisers Pay $400K Settelment for Overhyping AI Investment Strategies – TradingView

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The Securities and Exchange Commission (SEC) has taken enforcement action against two investment advisory firms for making false and misleading claims about their use of artificial intelligence (AI) in their investment processes. Both companies agreed to pay a total settlement of $400,000.

SEC Cracks Down on “AI Washing” by Investment Advisers

In separate orders announced today (Monday), the SEC charged Toronto-based Delphia (USA) Inc. and San Francisco-based Global Predictions Inc. with violating securities laws by misrepresenting their AI capabilities to clients and potential investors.

According to the SEC’s order, from 2019 to 2023, Delphia made false statements about using AI and machine learning that incorporated client data to predict successful investments in its filings, press releases, and website. However, the SEC found Delphia did not possess the claimed AI capabilities.

Similarly, the SEC order states that in 2023, Global Predictions falsely claimed on its website and social media as the “first regulated AI financial advisor” and touted providing “Expert AI-driven forecasts,” despite not utilizing AI as advertised.

“We’ve seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies,” said SEC Chair Gary Gensler. “Investment advisers should not mislead the public by saying they are using an AI model when they are not.”

Violations of Marketing Rules and Other Charges

Both firms were charged with violating the SEC’s Marketing Rule, which prohibits investment advisers from disseminating advertisements containing untrue statements of material fact.

The SEC order also found that Global Predictions falsely claimed to offer tax-loss harvesting services and included an impermissible liability hedge clause in its advisory contracts, among other violations.

Delphia and Global Predictions agreed to cease-and-desist orders, censures, and civil penalties totaling $400,000 without admitting or denying the findings

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