SEC Targets AI Washing in 2024 Enforcement Wave
What the SEC’s first AI-washing enforcement actions mean for startups using AI narratives in go-to-market and fundraising.
MB
Max Beech
Head of Content
TL;DR
- The US SEC fined Delphia and Global Predictions $400K combined for exaggerating AI capabilities -its first explicit “AI washing” cases.
- Expect regulators to scrutinise AI claims in marketing, investor decks, and product documentation throughout 2025.
- Startups need verifiable evidence stored in their Product Brain before repeating an AI claim externally.
Key takeaways
- Document how models are trained, governed, and monitored; speculation invites fines.
- Align marketing copy with compliance-approved language and review quarterly.
- Educate revenue teams on what they can and cannot claim during demos.
- What happened in the SEC’s AI washing cases
- Why it matters for startup go-to-market teams
- How to future-proof your AI claims
- Risks, counterpoints, and next steps
- FAQ
SEC Targets AI Washing in 2024 Enforcement Wave
On 18 March 2024, the US Securities and Exchange Commission charged Delphia (USA) Inc. and Global Predictions Inc. for misleading investors about their use of artificial intelligence. Delphia claimed its algorithms could “predict which companies and trends were poised for growth” while Global Predictions marketed its product as “the first regulated AI financial advisor,” despite limited underlying AI capabilities. Both firms settled -paying $225,000 and $175,000 respectively -without admitting or denying findings (SEC, 2024).
FTC Chair Lina Khan warned in April 2024 that marketing teams would face similar scrutiny if AI claims overpromise (FTC, 2024). Regulators view AI misstatements like any other material misrepresentation.
What happened in the SEC’s AI washing cases
Which rules were violated?
The SEC cited Section 206(2) and 206(4) of the Investment Advisers Act, plus Rule 206(4)-1 (marketing rule). Firms failed to maintain documentation and made misleading statements about automation maturity.
What penalties were issued?
- Delphia: $225,000 civil penalty; cease-and-desist order; censure.
- Global Predictions: $175,000 civil penalty; cease-and-desist order; censure.
| Firm | Alleged claim | Reality | Penalty |
|---|---|---|---|
| Delphia | Predictive AI selecting investments | Used limited automation, lacked documentation | $225K |
| Global Predictions | “First regulated AI financial advisor” | Relied on third-party data, manual processes | $175K |
Why it matters for startup go-to-market teams
How does this affect marketing copy?
If you say “our AI automates X,” regulators expect documented proof. Sync messaging with your positioning refresh framework and compliance approvals agent before launch.
What about fundraising decks?
Investors expect evidence as much as regulators. Keep model cards, evaluation metrics, and guardrails in your Product Brain so diligence flows faster.
How to future-proof your AI claims
- Inventory claims: Catalogue every AI statement across web, sales, PR, and investor materials.
- Evidence check: Store training data sources, human-in-the-loop steps, and evaluation results in your knowledge base.
- Approval workflow: Route new claims through legal and compliance with an automated audit trail.
- Educate teams: Run enablement sessions so sales and marketing use approved language only.
- Monitor policy: Track SEC, FTC, and EU AI Office updates via your market intelligence cadence.
“[PLACEHOLDER quote from legal counsel on AI claim governance.]” - [PLACEHOLDER], General Counsel
Risks, counterpoints, and next steps
Is this only about financial services?
No. The SEC’s actions set precedent, and the FTC has authority over consumer marketing across sectors. Assume scrutiny regardless of industry.
Won’t legal reviews slow go-to-market?
Automate intake and evidence collation. With a standing approval workflow, review cycles drop to hours, not weeks.
What if our AI is early-stage?
Be honest. Say “assisted by AI” or “using machine learning prototypes.” Document limitations and roadmaps.
Summary + next steps
Regulators have drawn a line: AI marketing must reflect reality. Audit every claim, store proof, and train teams. Fines aside, honest messaging builds trust faster.
- Now: Inventory AI statements across channels.
- Next 2 weeks: Spin up an approval workflow with legal/compliance.
- Quarterly: Review messaging for consistency with actual capability.
CTA for compliance-minded startups: Run your Product Brain approvals and keep AI narratives anchored in evidence.
FAQ
Does the SEC define “AI washing” formally?
The term is colloquial, but the SEC applies existing anti-fraud provisions to misleading AI claims.
Are civil penalties capped?
Penalties depend on factors like investor harm, cooperation, and remediation. Expect six figures for serious misstatements.
How do we prepare for international rules?
Track EU AI Act obligations via the AI Office and align disclosures now to avoid rework later.
Author
Max Beech, Head of Content
Last updated: 15 April 2025 • Expert review: [PLACEHOLDER], Regulatory Counsel