AI in action · Regulation
SEC Enforcement Chief Puts AI Disclosures Under Review
The SEC is reviewing what AI companies disclose about their risks, enforcement director David Woodcock told Reuters. The concern: a bubble fed by circular deals.
The Securities and Exchange Commission has added its enforcement division to the list of people asking hard questions about AI spending. In an interview with Reuters published on Friday, October 30, David Woodcock, who became the agency's enforcement director in May, said the SEC is examining the corporate disclosures of artificial intelligence companies, against a background of investor concern about a possible AI bubble fuelled by circular deals.
Woodcock was careful about the limits. The agency does not want to hold back innovation in technology, he said; its job is to make sure issuers give investors the full picture of the risks. "Our principal concern is that people are making accurate disclosures about material information," he said, "so that investors know what they're getting into." Where that does not happen, "then enforcement will be present." He called enforcement "a very necessary piece of making sure people are doing that."
The timing explains why the comments landed. They came at the end of a week in which Alphabet suffered the biggest one-day loss of market value in its history, Meta reported negative quarterly free cash flow and Amazon's quarterly spending reached $75.9 billion, as large technology companies disclosed that they are burning cash on AI expansion while interest rates rise. "Circular deals" is the market's shorthand for arrangements in which a supplier invests in a customer that then buys the supplier's products or capacity, so that the same money shows up as investment on one side and revenue on the other.
Nothing in the interview points to a case. Circular financing is not illegal in itself, and the SEC has so far relied on its existing disclosure rules, comment letters and the threat of enforcement rather than an AI-specific rulebook. What the remarks change is the standard investors can expect filings to meet: related-party links, the size of off-balance-sheet lease commitments and the concentration of revenue in a few AI customers are exactly the kind of material information Woodcock described.
He also widened the lens. AI tools, he said, have made scams cheaper and easier to produce at scale, putting more people at risk, and brokers and other firms need processes to protect retail investors and should "take thoughtful action." The SEC is also watching private markets, where conflicts of interest and valuations are a concern, and is working with the Commodity Futures Trading Commission on prediction markets. For shareholders of AI companies, the practical takeaway is to read the risk factors and commitments sections of the next quarterly filings closely: the regulator says it will.
Sources: Reuters via Yahoo Finance — US SEC's top cop says agency is monitoring AI corporate disclosures (Oct 30, 2026)