SEC indicts two investment advisers for making false and misleading claims about AI

Two investment advisers have been charged by the Securities and Exchange Commission (SEC) with making “false and misleading statements” about the use of artificial intelligence (AI) and machine learning in their operations.

Delphia (USA) Inc. and Global Predictions Inc. advertised on their websites, social media, and elsewhere that they use AI and machine learning algorithms to improve investment strategies. However, an SEC investigation found that the companies did not actually have or used as much technology as they claimed.

“A growing number of investors are considering the use of AI tools when making investment decisions or deciding to invest in companies that claim to leverage their transformative power. “As today’s enforcement action makes clear to the investment industry, when they claim to use AI in their investment processes, we are committed to protecting them from those who engage in must ensure that their representations are not false or misleading.”

A spokesperson for Global Predictions told Investopedia that the company “fully cooperated with the investigation and was happy to withdraw this matter. Additionally, the company is fully cooperating with the investigation and is happy to withdraw this matter.” I made it clear,” he said.

The company published a blog post on Monday revealing how it uses AI in its products.

From 2019 to 2023, Toronto-based Delphia made various claims about its use of AI in SEC filings, press releases, and its website. They included a statement claiming that AI “turns data into an unfair investment advantage.” Delphia had approximately $187 million in assets under management as of September 2023, according to SEC filings.

The SEC found that such statements were misleading or false because Delphia did not have the AI ​​capabilities it advertised, and the company admitted in 2021 that it had made the false statements. . Although some of these statements have been changed or deleted, the SEC has determined that Delphia had made additional false statements in 2023 since first making false statements to the SEC in July and October 2021. Found it again.

As of Monday morning, the “How it Works” page on Delphia’s website states that the company “wants to turn your data into an unfair investment advantage” and that its current capabilities Rather than stating, it suggests possibilities for future activities.

San Francisco-based Global Predictions also made false or misleading statements, including advertising itself as the “first regulated AI financial advisor,” despite failing to provide evidence of that claim to the SEC. It has been found. Global Predictions also inaccurately states in its marketing materials that it “used.”[e]“Expert AI-driven predictions,” the SEC found.

According to the SEC, Global Predictions appears to inflate the amount of assets in the company’s portfolio and the effectiveness of its models in outperforming other economic benchmarks.

The companies neither admit nor deny the SEC’s findings, and plan to settle the case by paying penalties of $400,000, including $225,000 from Delphia and $175,000 from Global Predictions. Delphia did not respond to requests for comment.