The Securities and Exchange Commission (SEC) Office of Investor Education and Advocacy, the North American Securities Administrators Association (NASAA), and the Financial Industry Regulatory Authority (FINRA) have jointly issued a warning regarding the rise of investment frauds involving the use of artificial intelligence (AI) – or claims of AI incorporation.
AI is one of the hottest sectors of tech right now. Just about everyone is predicting AI will soon be ubiquitous, making all sorts of decisions instead of real people making determinations. This holds true for financial services, and, in fact, AI and machine learning (ML) have been in use in financial services for some time now. It is probably the emergence of ChatGPT that has brought AI to the forefront of popular knowledge – this holds true for criminals as well – who may see an opportunity to separate good money from the unsuspecting.
The three entities say to watch out for unlicensed operators claiming to offer AI in the investment process. This is advice that should be observed for any investment platform – never use one that does not have regulatory approval, and be certain to confirm claims are not bogus.
The group also advises investors to be cautious about big claims regarding AI technology. Some firms claim to be leveraging AI, and it may be little more than a claim without any real technology – vapor AI. Always review disclosures and do your own due diligence on a prospective investment or service.
And, of course, never, ever listen to celebrity or influencer endorsements. These are some of the least sophisticated people on the planet who probably struggled to graduate from high school. If you are listening to celebrities or influencers for your investments, you should probably consider investing in ETFs or mutual funds. You will do better.
