AI washing
What AI washing is, the 2024 SEC enforcement actions that put it on the map, and how advisors avoid it.
AdvisorIQ ·
Definition
AI washing —
Making false or exaggerated claims about the use of artificial intelligence in a product or service — for example, marketing "AI-powered" capabilities that don't meaningfully exist or overstating what the AI actually does.
The term is a cousin of "greenwashing." For investment advisers, it became a concrete enforcement risk in 2024.
The 2024 SEC actions
On March 18, 2024, the SEC announced its first enforcement actions targeting AI washing, settling charges against two investment advisers for false and misleading statements about their use of AI. Delphia (USA) Inc. agreed to pay $225,000 and Global Predictions, Inc. $175,000 — $400,000 combined — under the Investment Advisers Act's antifraud and Marketing Rule provisions. Global Predictions had, among other things, falsely claimed to be the "first regulated AI financial advisor."
The takeaway for advisors: claims about AI are marketing statements, and marketing statements have to be true.
How advisors avoid it
- Describe what your tools actually do, not what sounds impressive.
- Don't imply AI involvement where there isn't any.
- Keep evidence of how AI-assisted outputs are produced — which is also why a research audit trail matters.
Avoiding AI washing isn't about avoiding AI. It's about being precise and able to back up what you say.