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ARTICLE · 27 MARCH 2024

SEC Takes Action Against 'AI Washing,' Fines Two Investment Advisers For Misrepresenting Artificial Intelligence Use

Herbert Smith Freehills Kramer LLP
Herbert Smith Freehills Kramer LLP
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Herbert Smith Freehills Kramer LLP

Herbert Smith Freehills Kramer LLP

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On March 18, the Securities and Exchange Commission (SEC) announced that it settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false...

GlobalTechnology
Yasho Lahiri
Yasho Lahiri
Harry Rubin
Harry Rubin
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Kevin Scanlan
George Silfen
George Silfen
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Alan Friedman
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Austin Manes
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On March 18, the Securities and Exchange Commission (SEC) announced that it settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their purported use of artificial intelligence (AI). Delphia and Global Predictions were fined $225,000 and $175,000, respectively. Without admitting or denying the SEC's allegations, both firms agreed to be censured and to cease and desist from further violations as part of the settlement.

The SEC charged Delphia with making false statements, in press releases and on its website, by overpromising its use of AI to generate early investment predictions based on analyzing data. For example, Delphia claimed that it used collective data to train its AI to "predict which companies and trends are about to make it big and invest in them before everyone else." The SEC's order found that Delphia did not have the AI or machine learning capabilities that it

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