What is AI washing and how does it affect advisors

AI washing is when a firm overstates or misrepresents its use of artificial intelligence in marketing. The SEC has already charged investment advisers for AI washing under the Marketing Rule's anti-fraud provisions — and the December 2025 risk alert made it clear that 2026 exams will look hard at AI-related claims. If you say you use AI, you must be able to prove how.

What counts as AI washing

• Claiming to "use AI" when the firm uses generic ChatGPT once a month.
• Marketing a process as "AI-powered" when no AI is involved.
• Implying AI-driven returns or insights without substantiation.
• Using vague AI claims to suggest superior performance.

What the SEC has already done

In 2024 the SEC charged two investment advisers under the Marketing Rule for false and misleading AI claims, settling for $400,000 combined. The enforcement template is now in place: any AI claim in advisor marketing has to be substantiated and recordkept.

How to talk about your AI use safely

• Be specific. "We use AI to draft client communications, then a CCO reviews every output before it sends." Not: "AI-powered client experience."
• Document the substantiation. Save examples, governance docs, vendor agreements.
• Don't imply outcomes you can't prove.
• Have an AI use policy your team actually follows.

This is general information, not legal advice. Talk to your compliance counsel.

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