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SEC Chair Gensler issues warning to firms about false AI claims

On Behalf of | Dec 22, 2023 | Securities and Compliance

The Chair of the Securities and Exchange Commission has issued a warning to firms in the securities industry regarding the marketing of their artificial intelligence products, according to a report in

Speaking at a recent panel discussion, Gary Gensler urged firms not to make false or misleading claims regarding the use of AI technologies. He said those engaging in “AI-washing” could be subject to enforcement action by making unsubstantiated marketing statements about the benefits of AI.

He said such false claims are prohibited by securities laws and that companies are required to make full, fair and truthful disclosures about their products.

Gensler addressed the topic at a conference hosted by The Messenger, where he was quoted by the Wall Street Journal as saying, “Don’t do it.  One shouldn’t greenwash and one shouldn’t AI wash.”  Greenwashing is the term given to those companies that make misleading claims regarding their environmental sustainability.

Earlier this year, the SEC proposed new rules to prevent misleading claims about funds’ environmental, social or governance (ESG) credentials. The amendments are designed to promote consistent, comparable and reliable information for investors regarding the incorporation of ESG factors.

With regards to AI claims, the Federal Trade Commission has put companies on notice that the agency will be scrutinizing their advertising practices for any false or unsubstantiated claims about their AI products.

The SEC has also taken separate action on the AI matter by proposing rules that would require broker-dealers and investment advisers to take certain steps to address conflicts of interest associated with their use of artificial intelligence in order to prevent firms from placing their interests ahead of investors’ interests.

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