SEC Chair Gensler Warns Against AI Washing

On Sept 4, 2024, SEC Chair Gary Gensler released a video on YouTube warning companies against "AI Washing". AI washing means exploiting the buzz about AI to make false or misleading claims to investors. Gensler suggests that the SEC is actively investigating possible AI washing. Accordingly, companies should assume that discussions of AI (or lack thereof) are now part of the SEC's marking rubric on company disclosure. Gensler's key points are:

• Disclosure about AI, as with all disclosure, must be "full, fair, and truthful".

  
  

• Claims about prospects based on AI must have a reasonable basis and that basis should be disclosed.

  
  

• Disclosures about material risks arising from AI should be specific to the company and not just boilerplate.

  
  

• Extensive discussions with the board of directors or on earnings releases about AI are a signal that a company may have related required disclosure.

A transcript of the video is available here.