Best AI for AdvisorsWhat is AI washing?
Short answer
Overstating or misrepresenting how a firm uses AI. The SEC has charged advisers for false AI claims under existing rules.
Definition
AI washing means claiming to use AI in ways you don't, or exaggerating what your AI does. It's not a new rule; it's misleading statements applied to AI.
On March 18, 2024 the SEC settled charges against two advisers, Delphia (USA) Inc. and Global Predictions Inc., for false and misleading statements about their use of AI. They paid $400,000 in total civil penalties, and both were found to have violated the Marketing Rule.
Why it matters for advisors
"AI-powered" has become a marketing reflex. For advisers, any AI claim in an advertisement has to be true and provable, and the SEC's fiscal 2026 exam priorities say examiners will review registrants' representations about their AI capabilities for accuracy.
The easiest protection is to describe concrete uses ("we use an AI notetaker") rather than vague capability claims.
AI washing can also run the other way in vendor sales. When a vendor pitches "AI-powered" features, ask what the AI actually does, what data it uses and what a person still has to check. The answers tell you both whether the tool is worth buying and what you can truthfully say about it to clients.
Example
A firm's website said its process was "driven by proprietary AI." On review, the only AI in use was a notetaker. The firm rewrote the page to describe exactly that.
Watch out for
AI claims in pitch decks, bios and social posts count, not just the website.
Related terms
- SEC Marketing RuleRule 206(4)-1 under the Advisers Act, which governs investment adviser advertisements, including AI-written ones.
- Fiduciary dutyAn investment adviser's duty of care and duty of loyalty to clients under the Advisers Act, covering the whole relationship.
- Artificial intelligenceSoftware that performs tasks that normally take human judgment, such as understanding language, spotting patterns or drafting text.
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Sources
Not legal or compliance advice. This is a plain-English summary for general education. Rules change and depend on your firm's facts, so check the primary source and talk to your CCO or counsel before relying on it.
Last updated .