Good morning. Securities and Exchange Commission Chair Gary Gensler has warned businesses against “AI washing,” or making false artificial-intelligence-related claims, likening it to the greenwashing phenomenon that has been the target of an agency crackdown.

Gensler said Tuesday that securities laws bar phony claims and require companies to give “full, fair and truthful” disclosures.

“Don’t do it,” Gensler said at a conference hosted by The Messenger, a news outlet. “One shouldn’t greenwash and one shouldn’t AI wash.”

• What's the term? “AI washing” has emerged as an informal term that describes businesses’ making unfounded AI claims to the public, akin to greenwashing, which refers to companies making unfounded representations about environmental sustainability.
   
• Background: The explosive growth in the number and sophistication of AI applications has led to concerns that marketing claims might not match what companies are delivering. The Federal Trade Commission in February warned companies across the economy that it would be on the lookout for bogus AI claims in advertising, from exaggerations of AI-powered products’ capabilities to outright fabrications that a product incorporates AI technology.

FTC investigates Exxon’s $60 billion deal for Pioneer.

U.S. antitrust enforcers are investigating Exxon Mobil’s plan to acquire Pioneer Natural Resources, which would be the largest oil-and-gas deal in two decades, according to securities filings.

Exxon in October proposed to buy Pioneer in a $59.5 billion all-stock deal, a takeover that would make Exxon the largest oil producer in the Permian Basin of West Texas and New Mexico, the most active U.S. oil field.

A rare challenge. Some oil executives and deal makers had anticipated a recent series of acquisitions would draw federal antitrust scrutiny. But antitrust regulators have rarely taken measures to thwart deals involving oil producers, often taking the view that their products compete globally.

Activist nuns, with stake in Smith & Wesson, sue gun maker over AR-15 rifles.

A group of activist nuns filed an unusual shareholder lawsuit to pressure gun maker Smith & Wesson to drastically change the way it markets, makes and sells its popular version of the AR-15 rifle.

A first. This type of lawsuit is brought by a group of shareholders against the company’s leadership claiming they have breached their duties. Such suits are common with publicly traded corporations, but lawyers said it appeared to be the first time one has been brought against gun makers over the manufacture and marketing of guns.

• Paul Munter, the Securities and Exchange Commission's chief accountant, talks to CFO Journal's Mark Maurer about the assessment of risks by auditors, firm culture and the importance of cash-flow statements.
   
• Canada’s financial-intelligence agency said Tuesday it has fined Royal Bank of Canada, the country’s largest lender by market capitalization, for failing to comply with the country’s rules aimed at deterring money laundering.
   
• The Supreme Court looked unlikely to impose strict new limits on Congress’s power to tax income, with some conservative and liberal justices alike signaling wariness about upending long-settled principles of the federal tax code.

China’s colossal hidden-debt problem is coming to a head.

China is trying to defuse a financial time bomb that could severely damage its banking system.

Cities and provinces across the country have accumulated a massive amount of hidden debt following years of unchecked borrowing and spending. The International Monetary Fund and Wall Street banks estimate that the total outstanding off-balance-sheet government debt is around $7 trillion to $11 trillion.

• Moody’s Cuts China Credit Outlook to Negative on Growing Debt Risks

• Procter & Gamble said it was booking a $1.3 billion charge on its Gillette business, adjusting the value of a shaving giant that it took over nearly two decades ago.
   
• CVS Health will move away from the complex formulas used to set the prices of the prescription drugs it sells, shifting to a simpler model that could upend how American pharmacies are paid.
   
• Europe’s security services are confronting a resurgence of terrorism threats, in a sign of how fallout from the Israel-Hamas war is rippling across the West.
   
• Russian President Vladimir Putin heads to the Middle East this week in a rare overseas trip focused on global oil markets, the conflict between Israel and Hamas and the war in Ukraine, analysts say, seeking to widen any gap between the U.S. and the key power brokers in the strategic region.
   
• Venezuela is ratcheting up its claims to a swath of Guyana, its oil-rich neighbor, which has recently become one of the world’s hottest energy frontiers.

• Israeli forces closed in on southern Gaza’s largest city in what is becoming a decisive battle of the two-month-old war with Hamas.
   
• AT&T struck a deal with Ericsson to buy up to $14 billion of its hardware and services after the Swedish equipment supplier pledged to open up its software to competing systems.
   
• As streaming giant Spotify cuts about 1,500 more jobs, a letter from Chief Executive Daniel Ek illustrates how companies’ quest for efficiency continues to play out.
   
• The most comprehensive global look at test scores since the pandemic shows learning loss is a stubborn worldwide problem, with American 15-year-olds experiencing similar or slightly less severe setbacks compared with peers in other countries.
   
• U.S. negotiators made a fresh offer to Russia in recent weeks to secure the release of detained Americans Evan Gershkovich and Paul Whelan, but Russia rejected the American proposal, the U.S. State Department said Tuesday.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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