The U.S. Securities and Exchange Commission (SEC) is gearing up to regulate the use of artificial intelligence (AI) in the financial sector, aiming to protect investors from false or exaggerated claims about AI capabilities. SEC Chair Gary Gensler has expressed concerns about investment advisers and public companies making unsubstantiated assertions about their AI prowess to attract investors. The SEC plans to propose rules by 2024 that would require firms to substantiate any AI-related claims and disclose the risks and limitations associated with their AI systems. This move comes amid a surge in AI hype, with companies across various industries touting AI capabilities to boost their valuations. The SEC’s goal is to ensure transparency and prevent investors from being misled by overhyped AI promises. Gensler emphasized the need for clear disclosures and cautioned against portraying AI as a panacea. The proposed regulations aim to strike a balance between fostering innovation and safeguarding investors from deceptive practices.