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Recent Gensler Speech Highlights SEC’s Two-Fold AI Disclosure Concerns

Mar 28, 2024 - natlawreview.com
SEC Chair Gary Gensler, in a speech at Yale Law School, highlighted the SEC's concerns about AI disclosures by companies. He warned against "AI washing", where companies make generalized or false claims about their use of AI, and urged companies to avoid boilerplate AI disclosures that are not specific to their operations. Gensler also discussed the potential risks and abuses in the capital markets due to AI, such as systemic risks from financial institutions relying on the same AI models, inaccurate AI predictions, conflicts of interest, and the use of AI for fraudulent schemes.

Gensler advised companies to balance their AI disclosure concerns, reporting material risks and developments related to AI only when they are potentially material. He also warned against referencing AI in public disclosures without a concrete reason. This comes as over 40% of S&P 500 companies referenced AI in their 2024 Form 10-K, with the SEC growing suspicious of whether all these companies have a particularized AI disclosure to make.

Key takeaways:

  • SEC Chair Gary Gensler highlighted the risks associated with AI in a recent speech, including systemic risks, inaccurate predictions, conflicts of interest, and potential for fraudulent schemes.
  • Gensler warned against 'AI washing', where companies make generalized or false claims about their use of AI in public disclosures.
  • Companies are advised to balance their AI disclosure concerns, reporting material risks and developments related to AI, but not referencing AI just for the sake of it.
  • There has been a sharp increase in mentions of AI on Form 10-Ks filed with the SEC in 2024, with over 40% of S&P 500 companies referencing AI in their filings, raising suspicions from the SEC.
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