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SEC Fines Two Firms $400,000 Over ‘AI Washing’

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The Securities and Exchange Commission has sued two investment advisers for making misleading claims about their use of artificial intelligence.

Delphia (USA) and Global Predictions are charged with the so-called "AI washing." 

On Monday, March 18, both companies settled with the SE.

They agreed to pay a total of $400,000 in fines without admitting or denying the allegations. 

Delphia will pay $225,000, while Global Predictions will pay $175,000.

This move underscores the SEC's commitment to addressing AI washing, which involves companies falsely promoting their products or services as AI-driven. 

Firms admitted AI claims were not true

The SEC accused Delphia of falsely claiming that from 2019 to 2023, it utilized AI and machine learning in its investment strategies and client data usage. 

In July 2021, Delphia admitted it did not use client data or develop an algorithm for such purposes.

However, the company continued making misleading statements in its advertising and communications until August 2023.

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Global Predictions faced allegations for inaccurately website and social media posts its platform offered "expert AI-driven forecasts."

However, there was not adequate evidence to support such claims. 

The firm also failed to validate its status as the "first regulated AI financial advisor".

It also did not adequately disclose material conflicts of interest related to testimonials.

Both firms were also criticized for compliance failures.

These included inadequate policies to prevent misleading advertising and improper use of social media.

While Delphia has not commented on the settlement, Global Predictions said it has cooperated fully with the SEC's investigation and is looking forward to moving past this issue. 

The company has updated its marketing materials to reflect its AI usage more accurately and detailed its approach in a blog post, including adjustments to its flagship PortfolioPilot product.

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