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AI deception costs two firms $400K: SEC's major crackdown!

AI deception costs two firms $400K

Two investment advisory firms were recently sanctioned by the U.S. Securities and Exchange Commission (SEC) for deceptive practices involving their claims about utilizing artificial intelligence (AI). These firms, Delphia Inc from Toronto and Global Predictions Inc from San Francisco, have consented to pay a total of $400,000 in fines to resolve the allegations. This case revolves around what's termed as "AI washing" – misleading claims about the use of AI technology.

The SEC's action underscores a growing vigilance against misleading AI claims. The SEC, led by Chair Gary Gensler, is emphasizing the importance of truthful disclosures, especially concerning the use of advanced technologies like AI. This focus aligns with the broader regulatory effort to ensure that companies accurately represent their use of new technologies.

Global Predictions acknowledged its cooperation with the SEC's inquiry and noted that it has revised its marketing to more accurately describe its use of AI. Delphia, on the other hand, did not immediately comment on the matter.

The SEC's investigation revealed that from 2019 to 2023, Delphia propagated false information about its AI and machine learning capabilities in various mediums, including SEC filings, press releases, and its website. Similarly, in 2023, Global Predictions was found to have disseminated misleading statements about its AI use on its website and social media platforms.

This situation exemplifies a broader issue wherein emerging technologies can generate significant interest and, unfortunately, lead to deceptive claims. Gurbir Grewal, the Director of the SEC’s Division of Enforcement, highlighted the recurrent nature of such false claims in technology sectors. To settle the charges, Delphia and Global Predictions are required to pay penalties of $225,000 and $175,000, respectively.



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