SEC Chair Gensler Cautions Against "AI Washing"

Chair Gary Gensler warned SEC registrants about the dangers of "AI washing"—the practice of overstating or misrepresenting the use of AI in their businesses. 

In an "Office Hours" video, Mr. Gensler cautioned public companies and financial entities, including investment advisers and broker-dealers, to avoid using vague or boilerplate language when discussing AI, and to provide material information that is relevant to their businesses and specific circumstances. 

Mr. Gensler reminded companies to provide accurate and specific information when making claims about AI, including whether the technology is developed in-house or sourced from third parties, and how it is actually being used. He reminded companies that any material information about AI, whether discussed in earnings calls or board meetings, must be disclosed to investors in accordance with securities laws. He further cautioned firms not to claim falsely that they use AI in investment strategies or services.