The Securities and Exchange Commission (SEC) Office of Investor Education and Advocacy, in collaboration with the North American Securities Administrators Association (NASAA) and the Financial Industry Regulatory Authority (FINRA), has issued a joint Investor Alert to caution investors about the growing threat of investment frauds leveraging artificial intelligence (AI) and emerging technologies. The alert emphasizes the need for investors to exercise caution in the face of scams exploiting the popularity and complexity of AI.
Unregistered/Unlicensed Investment Platforms
Investors are warned about the surge in fraudulent activities surrounding unregistered and unlicensed investment platforms claiming to utilize AI for trading. These platforms often make unrealistic promises of guaranteed returns, and investors are advised to verify the registration status of investment professionals and platforms before committing funds. Additionally, caution is advised against claims that AI can ensure remarkable investment returns, as such assurances are often indicative of fraudulent schemes.
Investing in AI-focused Companies
The alert highlights the risks associated with investing in companies that claim leadership in AI development. Fraudsters use the hype around emerging technologies to attract investors with promises of substantial gains. Investors are urged to scrutinize promotional campaigns, review company disclosures, and use resources such as the SEC’s EDGAR database to access information about public companies.
Celebrity Endorsements
The rise of financial influencers on social media has led to an increase in celebrity endorsements for investment opportunities. However, the alert advises investors to be skeptical of endorsements and to focus on companies genuinely developing AI products or services. Investors are encouraged to review company disclosures and assess the legitimacy of their promotional activities.
AI-Enabled Technology Scams
Fraudsters employ AI technology to create deepfake audio and video, spreading false or misleading information. Investors are warned about potential scams involving impersonation of family members, CEOs, or regulatory authorities. To protect themselves, investors should independently verify communications from regulatory bodies and investment professionals, be cautious of unsolicited investment requests, and implement identity verification measures for emergency situations.
Do Not Solely Rely on AI-Generated Information
Investors are cautioned against relying solely on AI-generated information for making investment decisions, as it may be inaccurate, incomplete, or misleading. The alert advises investors to verify the authenticity of sources, consult registered investment professionals, and learn more about wise investing practices and fraud prevention from authoritative sources.
The Investor Alert serves as a comprehensive guide for investors to safeguard their finances against the rising tide of investment frauds exploiting AI. By staying vigilant, conducting thorough research, and seeking advice from registered professionals, investors can protect themselves from potential scams and make informed investment decisions.
Please visit the SEC’s website to read the complete SEC Investor Alert: Artificial Intelligence (AI) and Investment Fraud.