Mumbai, February 23 Sebi's full-time member, Amarjeet Singh, cautioned on Monday against "artificial washing," or the use of exaggerated claims as a marketing tactic, warning that such instances can erode public trust in the markets.
"We have seen instances of market participants making overstated claims about using AI to deliver exceptional returns," Singh said, addressing an event jointly organized by IIMK and NSE here.
Asking companies to be mindful of how they communicate claims on the use of AI, Singh warned, "exaggerated claims, or selective disclosures, often referred to as 'AI washing', can mislead markets and erode trust."
He acknowledged that AI is a powerful tool for education, research, and accessibility, but advised caution as AI adoption grows, because of its ability to generate "convincing misinformation at scale."
"Can we confidently say that today's true and fair reports truly reflect economic reality?" he asked, adding that such questions are more relevant in the current times.
There are newer forms of "narrative-led communication," including "purpose-washing" and "greenwashing," Singh said, pointing out that the aspirational language used in such efforts can sometimes run ahead of "verifiable action and measurable outcomes."
There is a historic shift in capital from "financial to intellectual capital," as seen in the explosive growth in the stock prices of seven tech giants in the US, he said, underlining that the intangibles are driving market value.
Singh rued that our reporting systems have not kept pace and underlined the need for reviewing the ways in which the reporting captures the intangible aspects of value creation, including the advantages of algorithm usage, human capital prowess, and societal impact.
"Until we do, we are navigating the future with yesterday's map," Singh said.
No one should be systematically disadvantaged by opacity, manipulation, hidden conflict, or engineered confusion, Singh said, adding that there is a possibility for information to act as a bridge between households and capital markets, and savings and productive investments if we get it right.
"At stake is not just market efficiency, but public trust in finance as a force for good," he concluded.