Wash, Fine, Repeat? SEC Enters Fray of Agencies Monitoring Companies’ AI Use | Legaltech News

The SEC has a few effective sets of tools it can wield to prosecute companies’ AI washing practices. In the Delphia and Global Predictions cases, for example, the agency charged both firms with violating its marketing rule, which prohibits investment advisers from sharing any advertisement that includes any “untrue statement of a material fact.”

But it’s not the only rule it can apply in these enforcement actions, Kern said.

“AI washing is a form of misrepresentation or misstatement. So they’re going to use the Advisers Act if it’s an advisory firm, and they’re gonna use the Exchange Act, if it’s a broker. And they’re just going to fit it into whatever existing rule,” he explained.

Source: Wash, Fine, Repeat? SEC Enters Fray of Agencies Monitoring Companies’ AI Use | Legaltech News