SEC’s 700% Increase in AI Disclosures Sets Stage for Litigation

Artificial intelligence-related disclosures have expanded rapidly across industries. A review of Form 10-K filings from S&P 500 firms during fiscal years 2019–2024 shows a sharp rise in companies that referenced AI and shifts in where AI disclosures appear in annual reports.

By 2024, all industries in the S&P 500 index included AI-related disclosures. Mentions increasingly appeared in the 10-Ks’ “Risk Factors” section—signaling that companies view AI as a potential material source of risk, meaning they’re seen as a key uncertainty impacting the organization’s financial performance, operations, reputation, or interests.

As AI disclosures become more frequent, they’re more likely to be treated as significant, or “material.” Monitoring these developments over time enables attorneys and experts to identify emerging benchmarks and trends, which in turn helps determine aspects of AI reporting that are most relevant to regulatory actions and private litigation.

Frequency of Disclosures

Form 10-K filings from 2019 to 2024 reveal how companies respond to a rapidly evolving AI environment—including their awareness and preparedness for legal, ethical, and operational risks. They also shed light on potential exposure to regulatory scrutiny or shareholder litigation and illustrate how a firm’s AI-related risk profile compares with its industry peers.

In our analysis, we first counted the frequency at which AI-related terms appear in each firm’s Form 10-K for each fiscal year between 2019 and 2024; any non-zero count of an AI-related term is treated as disclosure.

The AI terms included in this analysis are artificial intelligence, machine learning, deep learning, neural network, algorithmic decision-making, natural language processing, generative AI, LLM, ChatGPT, and autonomous systems.

In 2019, 55 firms referenced AI, using about one AI-related term on average. By 2024, that number rose to 444 firms—a 700% increase—with an average of 19 AI-related terms per filing.

We next investigated where S&P 500 firms reference AI in their annual reports. We focused on three sections of the Form 10-K with the most prevalent discussion of AI-related terms: Business (Item 1), Risk Factors (Item 1A), and MD&A (Item 7).

We observed a shift in where S&P 500 firms discuss AI in their 10-Ks. From 2019 to 2022, AI appeared mainly in section “Item 1: Business,” which usually describes a company’s operations and environment. By 2024, most AI-related discussions had moved under “Item 1A: Risk Factors,” which usually highlights key uncertainties.

This shift suggests that firms are viewing AI not only as part of their business operations, but also as a potential material source of risk.

We next analyzed whether firms in specific industries exhibit different patterns in AI-related disclosures. We classified firms in the S&P 500 Index into industry groups using Global Industry Classification Standard definitions.

In 2019, eight out of 11 industries had some disclosure, with the most firms classified in the information technology sector. Financials took the lead in AI-related disclosure in 2024, followed by information technology, industrials, and health care.

The nature of AI-related disclosure for the financial sector is broad, ranging from product innovation to integration into companies’ risk modeling, which may have contributed to Financials taking the lead in this measure. By 2024, every GICS industry in the S&P 500 included firms discussing AI in their annual reports.

Future Litigation, Enforcement

Regulators have taken notice. In 2025, the Securities and Exchange Commission launched an AI task force and brought several enforcement actions against issuers and advisers whose AI claims overstated system capabilities.

The Federal Trade Commission likewise has pursued cases involving deceptive or unsubstantiated AI claims and, in September, it demanded detailed transparency from seven major chatbot developers on testing, monitoring, and safeguards.

These actions indicate a growing expectation that companies must substantiate AI representations across both investor-facing and consumer-facing disclosures.

Litigation involving AI-related disclosures remains limited, reflecting that AI disclosures have only recently surged in public filings. To date, SEC activity has focused primarily on cases involving alleged fraudulent schemes or exaggerated claims of AI capability, rather than disputes arising from mainstream corporate disclosures.

A further review of federal filings since 2000 shows that the SEC brought 23 AI-related actions in federal court, with the vast majority involving misconduct tied to purported initial public offerings that never materialized or promotional schemes. Just three of those complaints involved public companies—all of them micro- or small-cap firms.

Looking Ahead

As AI technologies proliferate and regulatory scrutiny intensifies, the materiality of these disclosures will continue to grow. The SEC and FTC have taken steps to address overstated or misleading AI claims, laying the groundwork for more robust enforcement activity in the years ahead.

Although litigation involving AI disclosures remains limited today, the accelerating volume and prominence of such disclosures, combined with emerging regulatory expectations, indicate that AI-related statements may become a meaningful area of future legal and expert analysis.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Diana Connor is a senior associate at The Brattle Group with expertise in accounting, finance, disclosure, and damages issues in securities, regulatory, and complex commercial litigation.

Adrienna Huffman, also a senior associate at The Brattle Group, is a consulting and testifying expert specializing in financial and forensic analysis.

Abhay Kurian contributed to this article.

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