In a speech at Yale Law School, SEC Chair Gary Gensler cautioned publicly traded companies against misleading investors through exaggerated claims about their utilization of artificial intelligence (AI). Gensler warned of the dangers of “AI-washing,” emphasizing that such practices could harm investors and violate US securities laws.
He stressed the importance of companies providing truthful and specific disclosures regarding their use of AI, rather than resorting to generic language. Gensler urged executives to assess whether AI significantly contributes to their business operations and to tailor their disclosures accordingly.
Additionally, he emphasized the need for transparency regarding the adoption and application of AI models within companies.
Gensler’s remarks underscored the broader trend of federal agencies reinforcing the applicability of existing laws to AI technologies. While discussions about potential new regulations continue, agencies like the FTC and SEC are already prepared to address AI-related issues using current legal frameworks.
For instance, the FTC has warned about the potential for AI to amplify scams and fraud, asserting its authority to enforce consumer protection and antitrust laws in response to such threats.
Similarly, the SEC possesses the authority to investigate and prosecute financial crimes involving AI, particularly instances of securities fraud or misconduct by investment advisers.
Gensler highlighted the SEC’s ability to target those who knowingly or recklessly misuse AI to deceive investors or engage in fraudulent activities. This includes individuals or entities that manipulate markets through fake orders or prioritize personal interests over those of clients.
By clarifying the legal landscape surrounding AI, Gensler aims to promote greater transparency and accountability in the financial sector.
In conclusion, Gensler’s speech serves as a warning to companies about the risks associated with misrepresenting their use of AI and underscores the regulatory scrutiny surrounding AI-related disclosures and activities in the financial markets.
