The US Securities and Exchange Commission (SEC) on Monday said that two investment advisors had agreed to pay hundreds of thousands of dollars in fines over false and misleading claims about their use of artificial intelligence (AI) technology.

The firms, Delphia and Global Predictions, agreed to pay $225,000 and $175,000 respectively in fines to settle the charges of “AI washing”, though neither company admitted or denied the charges.

According to the SEC’s order against Delphia, from 2019 to 2023, the firm made false and misleading statements in its SEC filings, in a press release, and on its website regarding its purported use of AI and machine learning that incorporated client data in its investment process.

The SEC said that the claims were false and misleading because Delphia did not in fact have the AI and machine learning capabilities that it claimed.

Meanwhile Global Predictions, the SEC found, made false and misleading claims in 2023 on its website and on social media about its purported use of AI. The company on its website falsely claimed to be the “first regulated AI financial advisor” and misrepresented that its platform provided “[e]xpert AI-driven forecasts,” the SEC said.

Both companies were also found to be in violation of the Marketing Rule.

SEC chair Gary Gensler, said: “We find that Delphia and Global Predictions marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not.

“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. Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors.”

Gurbir S. Grewal, director of the SEC’s Division of Enforcement, added that “public issuers making claims about their AI adoption must also remain vigilant about similar misstatements that may be material to individuals’ investing decisions.”

Regulators globally are ramping up their focus on AI, with the European Parliament last week voting in favour of the landmark AI Act which would provide the first ever set of guardrails for the tech.

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