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The proliferation of announcements, warnings, and headlines alternatively hailing or despairing the rise of artificial intelligence might support the conclusion that a degree of hype is behind all the buzz. The Security and Exchange Commission just confirmed that inkling, and also provided business leaders a warning about adding to the atmosphere of exaggeration with any "AI-washing" claims of their own. Violators in the financial services sector could face serious penalties, the agency said.
Nobody questions the power of current or future AI applications to speed and improve a huge number of work tasks, often relieving humans from the drudgery of performing the most boring parts of a job. But Gary Gensler, chair of the Security and Exchange Commission, has clearly had enough of the more cynical ways some people in business have resorted to self-serving hype -- or outright fibs -- about the technology. In much the way dubious initiatives that claimed to help the environment eventually generated denunciations of "greenwashing," Gensler charged two businesses with "AI washing" for mispresenting the use and benefits of AI to customers.
Worse still, the SEC fined the investment advisory firms it cited. Delphia (USA) and Global Predictions must pay a total of $400,000 for their hyperbole. The offending exaggerations included Global Predictions' claims in its client and marketing documents that it used tech-generated services that didn't exist, as well falsely calling itself the "first regulated AI financial advisor." Delphia, meanwhile, simply "did not in fact have the AI and machine learning capabilities that it claimed," the SEC said.
As a result, both firms now share the unenviable fate of birthing "AI-washers," which will likely become a phrase cited as often as AI claims themselves.
"Investment advisers should not mislead the public by saying they are using an AI model when they are not... [because such] AI washing hurts investors." Gensler said in an SEC statement, repeating the term he first used in a February speech. "We've seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies."
How big is the risk that AI-washing may soon be used by everyone doubting the purported wonders of the technology? Ask Gurbir S. Grewal, director of the SEC's Division of Enforcement, who was quoted in the very next paragraph of the agency's statement.
"As more and more investors consider using AI tools in making their investment decisions or deciding to invest in companies claiming to harness its transformational power, we are committed to protecting them against those engaged in 'AI washing,' " Grewal said, noting the financial and legal risks of exaggeration apply to publicly traded companies in other sectors than finance. "Public issuers making claims about their AI adoption must also remain vigilant about similar misstatements that may be material to individuals' investing decisions."
Obviously, both developers of AI and the larger companies investing fortunes to purchase and operate those applications are the main audience for the SEC's warning and fines. Yet smaller businesses also need to remain aware of both the claims and consequences of their AI use to clients.
The Consumer Financial Protection Bureau, for example, has issued several policy positions noting businesses and individuals using AI to process loans, rentals, or other credit-related requests must explain reasons for each refusal -- a blanket "the app said so" isn't sufficient justification.
In the same vein, Federal Trade Commission Chair Lina Khan has said the agency will keep close watch for the ways AI may "turbocharge" the methods of duping unsuspecting consumers and hold offending companies accountable.
Even in cases when businesses or other organizations that use AI applications inadvertently run afoul of regulations or laws, federal authorities say they'll come calling, no matter the degree of flattering hype the tech enjoys.
"Our staff has been consistently saying our unfair and deceptive practices authority applies, our civil rights laws, fair credit, Equal Credit Opportunity Act, those apply," FTC Commissioner Alvaro Bedoya said of the agency's enforcement plans in comments to Congress last year, according to CNN. "There is law, and companies will need to abide by it."
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20.03.2024
Ads in Chatbots Are Inevitable, Says This Marketing Professor
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The proliferation of announcements, warnings, and headlines alternatively hailing or despairing the rise of artificial intelligence might support the conclusion that a degree of hype is behind all the buzz. The Security and Exchange Commission just confirmed that inkling, and also provided business leaders a warning about adding to the atmosphere of exaggeration with any "AI-washing" claims of their own. Violators in the financial services sector could face serious penalties, the agency said.
Nobody questions the power of current or future AI applications to speed and improve a huge number of work tasks, often relieving humans from the drudgery of performing the most boring parts of........
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