
In March 2024, the Securities and Exchange Commission (SEC) took action against Delphia (USA) Inc., a former registered investment adviser, for making false and misleading claims about its use of artificial intelligence (AI) and machine learning in its investment strategies. The SEC’s administrative proceeding, under the Investment Advisers Act of 1940, highlights critical violations by Delphia, resulting in remedial sanctions and a cease-and-desist order.
Key Provisions of the SEC’s Action
- Misleading Claims About AI and Machine Learning: From August 2019 to August 2023, Delphia falsely represented that it used AI and machine learning to analyze its clients’ data, such as social media and banking information, to inform its investment decisions. However, in reality, none of this data was ever used in its investment algorithms. Delphia made these claims in regulatory filings, advertisements, press releases, and social media posts, misleading its clients and the public about its capabilities.
- Failure to Implement Corrective Actions: Despite an SEC examination in 2021 that revealed the inaccuracies, Delphia failed to fully correct its statements. While it updated its Form ADV disclosure in August 2021 to reflect that it did not use client data in its investment decisions, it continued to make misleading claims through advertisements and communications with clients until August 2023.
- Non-Compliance with Advertising and Compliance Rules: Delphia violated several provisions of the Advisers Act, including:
- Section 206(2): Engaging in deceptive practices, operating as a fraud or deceit on clients.
- Section 206(4) and Rule 206(4)-1: Disseminating false or misleading advertisements.
- Rule 206(4)-7: Failing to implement policies and procedures designed to prevent violations of the Advisers Act, particularly in advertising and social media communications.
- SEC Sanctions: The SEC ordered Delphia to:
- Cease and desist from further violations of the Advisers Act.
- Pay a civil penalty of $225,000 within 10 days.
- Implement a process to ensure that false claims and misleading advertisements do not recur.
Lessons Learned:
This case underscores the importance of maintaining accurate and truthful communications in the financial industry, particularly when it comes to advanced technologies like AI and machine learning. Investment advisers must ensure that their marketing materials reflect reality and that they have robust compliance policies in place to prevent violations.
Delphia’s case serves as a reminder to firms in the financial sector that deceptive practices, especially when involving cutting-edge technologies, will not be tolerated by regulators, and compliance programs must be diligent in preventing such missteps.
About Michael Rasmussen

Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.
Michael is also the founder of FinProLaw, an online learning platform where Michael has created courses designed for investment adviser compliance professionals. These courses include:
- Investment Adviser Compliance Essential for Chief Compliance Officers
- Foundations of Investment Adviser Compliance
- What is a “Security”?
- Investment Adviser Marketing Rule
- Regulation A – Exemption from Registration
- Regulation Crowdfunding – Exemption from Registration
- Regulation D – Exemption from Registration
Michael can also be found on LinkedIn.
Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw to learn more.