Chair Gary Gensler on AI Washing

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I get why so many people are talking about artificial intelligence. AI is the most transformative technology of our time, fully on par with the internet.

It's already being used in finance, where it has the potential benefits of greater inclusion, efficiency, and user experience.

But let's face it, when new technologies come along, we've also seen time and again false claims to investors by those purporting to use those new technologies.

Think about it. Investment advisers or broker dealers might want to tap into the excitement about AI by telling you that they're using this new technology to help you get a better return. Public company execs, they might think that they will enhance their stock price by talking about their use of AI.

Well, here at the SEC, we want to make sure that these folks are telling the truth. In essence, they should say what they’re doing, and do what they’re saying. Investment advisers or broker dealers should not mislead the public by saying they are using an AI model when they're not, nor say that they're using an AI model in a particular way, but not do so.

Public companies should make sure they have a reasonable basis for the claims they make and yes, the particular risks they face about their AI use, and investors should be told that basis.

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.

So, everyone may be talking about AI, but when it comes to investment advisers, broker dealers, and public companies, they should make sure that what they say to investors is true.