SEC Chairman Warns Companies of Misleading Claims and Risks in the AI Boom

Investors must be cautious of AI washing by companies as the technology continues to gain hype on Wall Street, according to Securities and Exchange Commission chairman Gary Gensler. In a speech at Yale Law School, Gensler emphasized the importance of corporations disclosing risks associated with artificial intelligence and avoiding misleading claims about its impact on their business. He urged companies to be truthful in their use of AI and associated risks, especially when raising funds from the public. Gensler also warned investment advisers and broker-dealers against falsely claiming the use of AI models or misrepresenting their application, as these practices could potentially violate securities laws. The SEC chief’s comments come amid Wall Street’s growing interest in AI investments, raising concerns of a possible bubble similar to the dot-com era. Gensler also highlighted the systemic risks that AI poses to financial stability, particularly in the context of interconnectedness and reliance on a few dominant AI models. He called for new thinking on policies to address these risks and suggested implementing system-wide interventions. Gensler has consistently expressed concerns about the risks associated with AI, emphasizing the need for transparency and caution in its adoption.