The Securities and Exchange Commission (SEC) today announced settled charges against two investment advisors, Delphia (USA) Inc. and Global Predictions Inc., for false and misleading statements regarding the alleged use of artificial intelligence (AI).
The companies agreed to settle the SEC charges and pay $400,000 in total civil penalties.
According to the SEC’s order against Delphia, from 2019 to 2023, the Toronto-based company made false and misleading statements in SEC filings, in a press release and on its website about its alleged use of artificial intelligence and machine learning that incorporated customer data into its investment process.
For example, according to the order, Delphi argued that it “put[s] collective data to make our AI smarter so it can predict which companies and trends are going to be big and invest in them before everyone else.”
The order finds that these statements were false and misleading because Delphia did not in fact have the AI and machine learning capabilities it claimed. The company was also charged with violating the Marketing Rule, which, among other things, prohibits a registered investment adviser from disseminating any advertisement that includes any untrue statement of material fact.
In the SEC’s order against Global Predictions, the SEC found that the San Francisco-based company made false and misleading claims in 2023 on its website and social media about its purported use of AI. For example, the company falsely claimed to be the “first regulated AI financial advisor” and misled itself that its platform provided “[e]xpert AI-driven predictions.”
Global Predictions also violated the Marketing Rule by falsely claiming to be offering tax loss harvesting services and including an indemnity clause in its consulting contract, among other securities law violations.
Without admitting or denying the SEC’s findings, Delphia and Global Predictions consented to the entry of orders finding them in violation of the Advisers Act and ordering them to be disciplined and to cease and desist from violating the charged provisions. Delphia agreed to pay a civil penalty of $225,000 and Global Predictions agreed to pay a civil penalty of $175,000.