In retrospect, artificial intelligence was always going to be as much a capital markets story as a technological one. Once narratives became as important as capabilities, concerns about so-called “AI washing” were inevitable. Just a year after the public release of ChatGPT, regulators began sounding the alarm. In March 2024, the U.S. Securities and Exchange Commission brought charges against two investment advisory firms — Delphia (USA) Inc. and Global Predictions Inc. — over statements about their use of AI in investment advisory services. Regulators alleged that the firms promoted AI-driven investing capabilities they could not substantiate, including one firm’s claim that it was “the first regulated AI financial advisor.”
The AI wash cycle isn’t over. Of the 51 AI-related securities class actions filed in the last five years, a significant majority included allegations that companies overstated or misrepresented their artificial intelligence capabilities, according to securities litigation data compiled by the consulting firm Secretariat.
