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Among the many executive orders launched at the outset of the current Trump administration was the January 23, 2025 Executive Order that declared the administration’s commitment to maintaining the U.S. at the “forefront of artificial intelligence (AI) innovation.” The Executive Order set out the administration’s commitment to removing policies and directives that “act as barriers to American AI innovation.”

The Executive Order meant a variety of things when it referred to removing barriers, and the statement does at least raise the question about what the administration’s – and in particular, the SEC’s – enforcement approach to AI will be, if the goal is to remove barriers. As discussed below, there are signs to suggest that the administration will continue to monitor and address AI-related misrepresentations, notwithstanding its commitment to removing barriers to AI innovation.  Continue Reading What About AI-Related Enforcement Under the Trump Administration?

In what may be the SEC’s first AI-washing enforcement action against a reporting company, on January 14, 2025, the agency brought a settled enforcement action against Presto Automation, a restaurant services technology company, based on the company’s alleged misrepresentations “regarding critical aspects of its flagship artificial intelligence (“AI”) product, Presto Voice.” A copy of the SEC’s January 14, 2025 press release about the action may be found here. The agency’s January 14, 2025 Order in the proceeding can be found here.Continue Reading SEC Files AI-Washing Enforcement Action Against Restaurant Technology Company

Over the last several months, various SEC spokespeople, including SEC Chair Gary Gensler, have issued strong precautionary statements against so-called “AI-washing,” which Microsoft Co-Pilot, an AI-powered tool, defines as a “deceptive marketing tactic where a product or service is promoted by exaggerating or falsely claiming the use of artificial intelligence.” The SEC has even issued an advisory warning investors against exaggerated or fraudulent AI-related claims.  In several prior enforcement actions, the SEC has made it clear that it is prepared to pursue those whom it deems to have engaged in AI-washing.

In the latest example of the SEC’s AI-washing focused enforcement activity, late last week the SEC announced that it had entered settled charges against an investment advisor, its principals, and related entities, alleging that the parties engaged in misrepresentations concerning the firms’ alleged used of AI to perform automated trading in clients’ accounts. The SEC’s October 10, 2024, press release regarding the action against Rimar Capital USA and related entities and individuals can be found here. The SEC’s October 10, 2024, administrative order in the matter can be found here.Continue Reading Investment Advisory Firm Hit with AI-Washing SEC Enforcement Action

It arguably is not news that the SEC is monitoring disclosure and related issues concerning ESG. After all, the agency’s enforcement division formed an ESG Task Force in March 2021. And as discussed here, the Task Force recently launched its first ESG disclosure-related enforcement action. Now, in the Task Force’s latest move, the agency charged an investment advisor with securities law violations related to the advisor’s claims that its fund investments had undergone ESG quality review, even though that was not always the case. BNY Mellon Investment Adviser, Inc., the investment adviser involved, agreed to pay a $1.5 million penalty to settle the charges. As discussed below, this latest Task Force action underscores the fact that the ESG cops are on the beat, and they are actively monitoring ESG-related disclosures. That could have important implications for future SEC enforcement activity.
Continue Reading Attention: The ESG Cops Are On The Beat

From the outset of his time in office, SEC Chair Gary Gensler has made it clear that establishing oversight of crypto assets represent one his priorities. In a speech last week, Gensler said that agency will be “very active” in bringing digital currency under its investor protection framework, saying further that the digital assets will not mature if they are not brought under broad regulatory oversight. The regulator’s position is not restricted to mere words; a recent report shows that the agency has indeed been active in asserting its cryptocurrency oversight through enforcement actions. According to a recent report from Cornerstone Research, the agency has bought 19 enforcement actions related to cryptocurrency in the first nine months of 2021. The report, entitled “SEC Cryptocurrency Enforcement: Q3 2021 Update,” can be found here.
Continue Reading SEC Enforcement Activity Targets Crypto Assets

With the latest whistleblower awards to two individuals totaling $114 million (including an award to one individual of $110 million), the total amount awarded under the SEC whistleblower since its first award in 2012 now totals over $1 billion. The pace in the number and size of awards has accelerated significantly in the past year, as the SEC under the Biden Administration had pursued a pro-whistleblower approach. A copy of the SEC’s September 15, 2021 press release about the latest awards can be found here. The agency’s September 15, 2021 order regarding the awards can be found here.
Continue Reading With Latest Awards, Total SEC Whistleblower Awards Top $1 Billion  

Even though the worst of the pandemic crisis in the U.S. appears, at least for now, to be past, the threat of COVID-19-related claims continues. In the latest example of the continuing COVID-19-related claim threat, the SEC has initiated a COVID-19-related enforcement action against a California-based digital health care company that had made claims early in the coronavirus outbreak about the company’s ability to profit from the outbreak. The SEC’s new action is a reminder that the threat of new COVID-19-related claims is ongoing. A copy of the SEC’s July 7, 2021 complaint against Parallax Health Sciences, Inc. can be found here. The SEC’s July 7, 2021 press release about the enforcement action can be found here.
Continue Reading SEC Files COVID-19-Related Enforcement Action Against Digital Health Firm

In recent years, the SEC has established itself as an active cryptocurrency enforcement agency, according to a new report from Cornerstone Research. The report, entitled “SEC Cryptocurrency Enforcement: Q3 2013 – Q4 2020,” details that between July 2013 and year end 2020, the agency initiated a total of 75 enforcement actions and 19 trading suspension orders against respondents involved with digital assets. The report also shows that the agency’s cryptocurrency activity has steadily increased throughout the 2013-2020 period. A copy of the report can be found here. Cornerstone Research’s May 11, 2021 press release about the report can be found here.
Continue Reading SEC Establishes its Cryptocurrency Enforcement Credentials

President Biden’s nominee to head the SEC, Gary Gensler, faced a grilling today before the U.S Senate banking committee as his nomination  proceeds through Congress. Although the outcome of his nomination technically remains uncertain, his eventual confirmation seems likely. With that possibility in mind, it seems timely to look ahead at some of the issues the agency may address and initiatives the agency may advance under the new administration.  As it is, because of some initiatives that already underway, it is possible to project where we might be headed, at least to a certain extent.
Continue Reading What’s Ahead at the SEC?

On December 4, 2020, in what is according to the SEC its first proceeding charging an issuer for misleading investors about the financial effects of the pandemic on company finances and operations, the SEC entered into a settled Cease and Desist Order with The Cheesecake Factory Incorporated based on the agency’s determinations that the company’s late March and early April statements that it was “operating sustainably” were, without further information, misleading to investors.  The SEC’s December 4, 2020 Cease-and-Desist Order can be found  here, and the agency’s December 4, 2020 press release about the Order can be found here.
Continue Reading SEC Charges Cheesecake Factory Over Misleading COVID-Related Disclosures