In Harvard Law School Forum on Corporate Governance, Litigation and A.I. Teams Discuss New SEC “AI-Washing” Enforcement Actions

In an article for the Harvard Law School Forum on Corporate Governance litigation & enforcement partner Amy Jane Longo, global head of A.I. and E-Discovery Shannon Capone Kirk, and associate Isaac Sommers examine how the SEC is approaching the use of artificial intelligence (AI) tools by registered firms. 

On March 18, the SEC announced it had settled charges against two investment advisers—Delphia (USA) Inc. (“Delphia”) and Global Predictions, Inc. (“Global Predictions”)—involving allegations that the firms’ promotional materials exaggerated their use of AI or machine learning in their investment services, a practice the SEC has described as “AI-washing.”

“As the first shot across the bow, the settlements underscore the SEC’s commitment to using existing rules to regulate firms’ various uses of AI tools, particularly in the area of “AI-washing,” said the team.” “Advisers and investment firms need to coordinate internally to ensure the consistent description of any AI tools in a manner aligned with their actual use by investment professionals.”