SEC emphasizes focus on “AI washing” despite perceived enforcement slowdown

The US Securities and Exchange Commission (SEC) recently highlighted its continued focus on artificial-intelligence-related misconduct as a key enforcement priority.

Speaking on a series of panels at the Securities Enforcement Forum West 2025, hosted by Docket Events on May 15, 2025, senior officials from the SEC’s Enforcement Division and newly constituted Cybersecurity and Emerging Technologies Unit (CETU) reiterated that “rooting out” fraud schemes related to “AI washing” – referring to a company’s materially false and misleading statements about their artificial intelligence (AI) capabilities – is an immediate priority. The comments provide additional color on how the SEC intends to allocate enforcement resources in the wake of the Unit’s recent rebranding and the broader “return to basics” agenda championed by Chair Paul Atkins.

These latest statements reinforce the trends explored in three prior client alerts, each of which is summarized below. Together, these developments reflect an evolving enforcement posture, coupling traditional antifraud theories with a sharpened focus on the unique transparency, governance, and investor-protection issues raised by AI and other emerging technologies.

Below, we summarize the CETU’s recent remarks, place the remarks in the broader enforcement landscape, and offer practical considerations for companies, investment advisers, broker-dealers, and other market participants that develop, deploy, or market AI-enabled products and services.

Securities Enforcement Forum remarks

Remarks by Madiha Zuberi, an enforcement attorney in the Unit, outlined CETU’s mandate and highlighted areas of interest:

• Zuberi emphasized that the staff is scrutinizing how both public companies and startups describe their AI capabilities to customers and investors.
  
  
• The Unit is evaluating, among other things, (i) predictive data analytics, (ii) AI-driven trading algorithms, (iii) chatbot functionality, and (iv) AI-generated investment advice. Zuberi noted that “whether there’s transparency around the technology” remains a key question – in other words, whether the issuer is accurately describing genuine machine-learning functionality or is simply repackaging rule-based automation under an “AI” label, and whether it is being communicated responsibly to customers.
  
  
• Zuberi also mentioned that, in addition to crypto and AI-washing enforcement, the Unit was tasked with evaluating cases involving cyber intrusion to access material nonpublic information and social-media-driven fraud.

• Enforcement officials emphasized that recent enforcement matters illustrate the SEC’s AI posture:

• Zuberi pointed to the 2024 settlements with investment advisers Delphia Inc. and Global Predictions Inc. – both resolved on allegations of AI washing – as representative of the types of cases the CETU might be interested in pursuing. The Delphia and Global Predictions settlements involved alleged false and misleading statements by both firms about their purported use of AI in their investment processes, such as in SEC filings, in press releases, and on their websites. The firms agreed to settle the SEC’s charges and pay $400,000 in total civil penalties.
  
  
• Additionally, Kate Zoladz, Deputy Enforcement Division Director for the West region, highlighted the still-pending Nate, Inc. case (also summarized below).

• The Commission reiterated its “return to basics” approach for traditional types of cases:

• Zoladz underscored that insider trading, false statements in capital raising, and breaches of fiduciary duty remain bedrock priorities of the Enforcement Division.
  
  
• She also reasserted that the SEC would not pull away from market enforcement, stating that “the reports of the SEC's death have been greatly exaggerated.”

Recent enforcement landscape: How the remarks align with recent SEC and DOJ activity

As we discussed in our April 16, 2025 client alert on the Nate, Inc. charges and in our January 28, 2025 client alert on the Presto Automation Inc. settlement, the Department of Justice and the SEC have already demonstrated a willingness to bring parallel criminal and civil actions where AI representations go beyond puffery and cross into deception. The recent remarks by SEC Enforcement are now institutionalizing that approach through a dedicated Unit whose remit extends beyond crypto to encompass AI, cyber intrusion, and social-media-driven misconduct.

Similarly, at the March 27, 2025 SEC Roundtable (see our April 3, 2025 alert), Acting Chair Mark Uyeda stressed a “technology-neutral” approach to the regulation of AI: cautioning an “overly prescriptive approach” and encouraging innovation, but ensuring the protection of investors with effective and cost-efficient regulations. The California remarks confirm that message: The staff’s focus is on AI uses that have a direct effect on investors.

Key insights and takeaways

The SEC’s recent remarks are the latest – and perhaps clearest – indicator that AI washing and broader AI abuse are not fringe issues but core enforcement priorities. Companies that make public statements about their AI capabilities should continue to expect scrutiny of those disclosures. By pairing robust governance with transparent and accurate communications, market participants can mitigate enforcement risk and position themselves for sustainable innovation in the age of AI.

Specifically, companies are encouraged to consider:

• Implementing AI governance frameworks. While many organizations believe that jumping into the “AI bandwagon” needs to happen sooner rather than later to not miss the opportunity, organizations need first to assess how AI is being developed, used, or leveraged across the organization in order to identify the associated risks related to the use of AI. As such, organizations are encouraged to adopt a governance framework that addresses the unique risks associated with AI and includes a cross-functional group of subject matter experts (eg, business function, legal, compliance, privacy, and cybersecurity professionals) equipped to assess AI capabilities and ensure they are appropriately reported to the market. Having a strong disclosure and controls environment around AI-related disclosures is paramount to withstand any AI-washing claims or inquiries.
  
  
• Appropriate documentation. Organizations should consider memorializing the technical architecture of AI systems so that they can be used to support statements about the systems’ capabilities in marketing materials, investor pitch decks, or public filings. Documentation should also cover data sources, model governance, human-in-the-loop processes, and limitations. Where functionality rests on deterministic code, robotic process automation, or human intervention, the organization’s statements should say so plainly.
  
  
• Ongoing testing. Slight changes in AI technology can result in significant changes to the overall reliability and accuracy of the system. As a result, organizations are encouraged to conduct periodic model testing and ensure that model performance or scalability claims remain accurate over time.
  
  
• Enhancing controls over emerging-technology statements. Disclosure committees and Sarbanes-Oxley (SOX) 302 sub-certification processes can be expanded to capture AI and other technology representations. Investor-facing materials should undergo elevated review when they reference novel or complex functionalities that could be material to a funding decision.
  
  
• Monitoring regulatory developments. Although the SEC currently relies on existing statutes, rulemaking or interpretive guidance could follow. Firms should track speeches, enforcement actions, and staff statements for evolving expectations around explainability, bias, and third-party AI vendors.
  
  
• Preparing for parallel exposure. The Nate, Inc. matter shows that misleading AI claims can attract criminal wire-fraud and securities-fraud charges as well as civil penalties, disgorgement, and injunctive relief. Firms are encouraged to incorporate potential parallel proceedings into their incident-response playbooks.

For more information

If you have questions or would like further information about AI washing enforcement, please contact the authors of this alert, your DLA Piper relationship attorney, or any member of the DLA Piper’s White Collar and Investigations, Artificial Intelligence, or Securities Enforcement and Regulation practice groups.