Regulators Issue Joint AI Investor Fraud Alert

In a jointly issued investor alert, the SEC Office of Investor Education and Advocacy, the North American Securities Administrators Association ("NASAA") and FINRA warned investors of the increased risks of fraud involving "the purported use of artificial intelligence (AI) and other emerging technologies."

The regulators highlighted the popularity of AI marketed products and the potential misuse by scammers. They urged investors to be wary of unregistered entities making unrealistic claims, and emphasized the importance of verifying information and sources in AI-related investments.

The regulators recommended that investors (i) be cautious of unregistered investment platforms claiming to use AI; (ii) be wary of companies making exaggerated claims about AI’s impact on their profitability; (iii) be aware that AI-enabled technology can be used in deepfake videos and audio; (iv) not rely solely on AI-generated information for investment decisions; (v) rely on registered investment professionals and platforms; and (vi) check the registration status and disciplinary history of investment professionals.