AI Washing and Bold Corporate Claims: NSSMC Examines the Experience of the Canadian Regulator

A company describes itself as a leader in artificial intelligence. But is AI really an integral part of its business — and how can an investor verify this?

Such exaggerated or insufficiently substantiated claims have already been given a name — AI washing — and are becoming a new challenge for capital market regulators.

Representatives of the Ontario Securities Commission (OSC) discussed how to distinguish well-founded corporate disclosure from promotional claims and what information investors should receive during a webinar for staff of the National Securities and Stock Market Commission of Ukraine.

The discussion focused on a broader issue — the quality of information companies disclose to investors. Simply making information public is not enough. Disclosure must be accurate, complete and balanced, enabling investors to assess a company, its prospects and risks and, on that basis, make their own informed investment decisions.

This is why the OSC’s experience is particularly relevant to the NSSMC: it demonstrates the regulator’s practical approaches not only to monitoring compliance with formal disclosure requirements, but also to assessing the quality and substantiation of the information available to the market.

How the Canadian Regulator reviews issuer disclosure

The OSC shared that it conducts both comprehensive reviews of issuers’ disclosure and targeted reviews focused on specific issues or risks.

Where the regulator identifies potential deficiencies, the company receives a comment letter with requests to clarify or supplement the information provided. Where necessary, further communication between the regulator and the company takes place.

If the deficiencies are material, the OSC may take corrective action, including requiring documents to be refiled. In certain cases, matters may be referred to the Enforcement Division.

Two areas where reviews have commonly found deficiencies are forward-looking information and situations where corporate disclosure becomes overly promotional.

AI Washing: when technology becomes part of the marketing

A separate topic of the webinar was AI washing — a practice in which a company makes general, exaggerated, misleading or insufficiently substantiated claims about its use of artificial intelligence.

For example, a company may position itself as a leader in AI without providing sufficient information to substantiate such claims.

For investors, it is important to have a clear understanding of the facts: which AI technologies the company uses, where they are applied, what role they play in its business and strategy, and what risks and costs are associated with them.

The principle remains the same: a bold claim should not replace the facts investors need to assess a company.

How it works in Ukraine

In Ukraine, the procedure and timelines for issuers’ disclosure of regulated information are set out in the NSSMC Regulation. It provides for the disclosure of periodic, special and other information and, in certain cases, requires such information to be published on the issuer’s website, in the database of the person responsible for publishing regulated information, and submitted to the NSSMC.

In this context, the OSC’s experience demonstrates an important principle: information disclosure is not merely about meeting a formal requirement to make information public. The information must be sufficient, balanced and substantiated so that investors can effectively use it to make their own investment decisions.

After all, the quality of information available to investors is one of the fundamental conditions for confidence in the capital market.