SEC Targets AI Washing in Private Capital Markets: “Old School Fraud Using New School Buzzwords” | Debevoise & Plimpton LLP

Until now, the SEC’s campaign against AI washing has targeted registered investment advisers, broker-dealers and public companies. For example, SEC Chair Gary Gensler declared in March 2024 that “AI washing, whether it’s by financial intermediaries such as investment advisers and broker dealers, or by companies raising money from the public, that AI washing may violate the securities laws.”

But the case against Raz demonstrates that the SEC is not limiting its scrutiny of AI representations to any particular market participants. Instead, the case makes clear that the SEC will scrutinize all AI-related claims made by any companies or firms, public or private, seeking to attract investors to raise capital. So while this matter may simply be —in the words of SEC Enforcement Director Gurbir Grewal—a case of “old school fraud using new school buzzwords,” the charges against Raz reinforce the importance of clear, accurate and comprehensive statements about the use of technology, automation, and artificial intelligence—not just for public companies, broker-dealers and investment advisers, but also for startups and smaller, private companies seeking to raise capital from sources other than the public markets.

Source: SEC Targets AI Washing in Private Capital Markets: “Old School Fraud Using New School Buzzwords” | Debevoise & Plimpton LLP