Feb 29, 2024,02:32am EST
SEC Investigates OpenAI for Potential Investor Misinformation
The Securities and Exchange Commission (SEC) has launched an investigation into OpenAI to determine if the company misled its investors, as reported by The Wall Street Journal. The probe was prompted by the temporary removal of CEO Sam Altman from his position last year.
According to sources familiar with the matter cited by the Journal, the SEC has issued subpoenas for internal records from both current and former leaders and board members of OpenAI. Additionally, the regulator has instructed company leaders to preserve internal documents as part of the investigation.
The SEC’s inquiry revolves around the sudden ousting of CEO Sam Altman by OpenAI’s board in November of the previous year. The board alleged that Altman was not consistently candid in his communications, leading to questions about potential misinformation provided to investors.
While specific instances of misleading statements by Altman have not been identified by the SEC, sources suggest that the investigation is a response to the board’s allegations regarding communication transparency.
Altman’s removal from the CEO position was met with significant controversy within OpenAI. Greg Brockman, the company’s co-founder, also departed following the board’s decision. However, Altman returned to his role as CEO less than a week later under a new board of directors.
The investigation into OpenAI’s investor disclosures comes amidst broader scrutiny of the company’s business practices. Regulators across the world, including the Federal Trade Commission (FTC) in the United States and the Competitions and Markets Authority (CMA) in the United Kingdom, are examining OpenAI’s relationship with Microsoft, particularly its $10 billion investment in the company in 2023.
The European Commission has also expressed interest in the matter, signaling concerns over potential regulatory violations related to Altman’s removal and subsequent reinstatement.
The outcome of the SEC investigation and the broader regulatory scrutiny surrounding OpenAI’s operations will be closely monitored by investors and industry observers alike.