Check AI-capability claims in a fundraising document against the SEC's AI-washing release
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- List every statement that the issuer or adviser uses artificial intelligence, machine learning or an automated model, and the system record, if any, that the file contains for that statement. Do not rewrite the disclosure.
- What the lawyer must review
- On 18 March 2024 the SEC announced settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for false and misleading statements about their use of artificial intelligence (Release 2024-36). Delphia agreed to a civil penalty of $225,000 and Global Predictions to $175,000. The release says the firms marketed AI capabilities they did not have, and that a public issuer making claims about its AI adoption must remain vigilant about misstatements that may be material. Rule 10b-5 prohibits an untrue statement of a material fact, or a misleading omission, in connection with the purchase or sale of a security. In a registration statement, Securities Act § 11 (15 U.S.C. § 77k) reaches an untrue statement or omission of a material fact when that part became effective. You decide what may be said, and only from the system record.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Consider narrowly defined preparation support after confirming the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Review the original source set for relevant material absent from the output, including contrary evidence, qualifications and remaining gaps.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.