On November 17, 2025, the SEC’s Division of Examinations (Division) issued its 2026 Examination Priorities supporting its stated mission—promote compliance, prevent fraud, monitor risk, and inform policy. The Division will continue its focus on compliance, governance practices, and cybersecurity while addressing emerging risks and technologies. Here’s what investment advisers, investment companies, and broker-dealers need to know to prepare for upcoming exams.
Since 2013, the Division has published its annual examination priorities for the areas with the highest risk to investors and the market. While many of the focus areas have been carried forward from 2025, new items mentioned include greater emphasis on complex alternative investment products, products sensitive to market volatility, and mergers and acquisitions (M&A) between existing investment advisers.
“In this increasingly complex and challenging financial and regulatory environment, we strive to improve compliance in a way that is both transparent and practical.” – Keith Cassidy, acting director of the Division of Examinations
Investment Advisers
As in previous years, the Division will prioritize examinations of advisers that have never been examined with particular emphasis on newly registered advisers.
Fiduciary Standards of Conduct
An adviser must, at all times, serve the best interests of its clients and must not place its own interests ahead of the client’s interests. An adviser also must eliminate or make full disclosure of all conflicts of interest. The Division will continue to focus on:
- Investment advice provided to clients and if that advice satisfies client fiduciary obligations. The focus will be on investment products with the following characteristics:
- Alternative investments, e.g., private credit and private funds with extended lock-up periods
- Complex investment products with holdings in illiquid underlying strategies, such as option-based exchange-traded funds (ETFs) and leveraged or inverse ETFs
- Higher-cost investment products compared to similar investments
- The impact of advisers’ financial conflicts of interest on providing impartial advice with consideration given to various factors, such as the investment product’s cost, investment objectives, liquidity, risks and volatility, likely performance in a variety of market and economic conditions, time horizon, and cost of exit.
- The advisers’ investment recommendations for consistency with product disclosures and the clients’ investment objectives, risk tolerance, and financial backgrounds, with an emphasis on recommendations to older investors and those saving for retirement.
- The Division will focus on particular types of advisers and advisory services that may create additional risks and potential conflicts of interest, including:
- Advisers that are dually registered as broker-dealers
- Advisers utilizing third parties to access clients’ accounts
- Advisers that have merged or consolidated with existing advisory practices
Compliance Program Effectiveness
These examinations generally include an evaluation of the core areas of advisers’ compliance programs, including marketing, valuation, trading, portfolio management, disclosure and filings, and custody, as well as an analysis of the annual review of an adviser’s compliance program effectiveness. Focus areas include:
- Whether the policies and procedures are implemented and enforced.
- Whether disclosures address fee-related conflicts, with a focus on conflicts that arise from account and product compensation structures.
- The Division’s focus may shift depending on an adviser’s practices or products, such as for advisers with activist engagement practices or when advisers change their business model or are new to advising certain investment products.
Investment Companies
The Division will continue to prioritize examinations of registered investment companies (RICs), including mutual funds and ETFs, due to their importance to retail investors. As with adviser examinations, the Division will continue to prioritize never-before-examined RICs, with particular emphasis on recently registered RICs.
For RICs, exams will evaluate compliance programs, disclosures, and governance practices, focusing on:
- Fund fees and expenses, and any associated waivers and reimbursements
- Portfolio management practices and disclosures, for consistency with statements about investment strategies or approaches, with fund filings and marketing materials, and the amended Fund “Names Rule”
The Division also highlighted certain developing areas of interest that it will continue to monitor, which include:
- RICs that participate in mergers or similar transactions
- RICs that use complex strategies and/or have significant holdings of less liquid or illiquid investments
- RICs with novel strategies or investments
Resource: SEC Updates Fund Names Rule
Broker-Dealers
Broker-dealer exams will continue to focus on recommended products that are complex or tax advantaged, ETFs that invest in illiquid assets, municipal securities, private placements, structured products, alternative investments, products with complex fee structures or return calculations, products based on exotic benchmarks, or other products representing a growth area for retail investment.
Financial Responsibility Rules
The Division will continue to focus on broker-dealer compliance with the net capital rule, the customer protection rule, and related internal processes, procedures, and controls. Areas of focus will include:
- Timeliness of financial notifications and other required filings
- The firm’s operational resiliency programs, including supervision of third-party or vendor provider services that contribute to the records used to prepare financial reporting information and change management
- Assessment of broker-dealer credit, market, and liquidity risk management controls to determine whether firms have sufficient liquidity to manage stress events
- Evaluation of cash sweep programs and prime brokerage activities, including issues of concentration, liquidity, and counterparty credit risks
Trading-Related Practices & Services
The Division remains focused on broker-dealer equity and fixed income trading practices. Areas of review will include:
- Trading practices associated with extended hours trading, and municipal securities, including the rates reset process on variable rate demand obligations, priority of orders, and mark-ups disclosure
- Routing and execution of orders that will include best execution, pricing and valuation of illiquid instruments, and disclosures regarding order routing and order execution information, including as required by Rule 605 under Regulation NMS
- Assess whether broker-dealers are appropriately relying on bona fide market making exceptions under Regulation SHO
- Examination of alternative trading systems, including a focus on compliance with requirements to have written safeguards under Rule 301(b)(1) under Regulation ATS, alignment with descriptions in the Form ATS-N, disclosures, and risk controls
Regulation Best Interest
Focus areas include:
- Recommendations with regard to products and investment strategies
- Conflict identification and mitigation practices, in particular with respect to recommendations of accounts, rollovers, and recommendations involving limited product menus
- Processes for reviewing reasonably available alternatives
- Process for satisfying the Care Obligation, including consideration of particular factors in a customer’s investment profile and the product and account type characteristics considered
Examinations may also focus on recommendations:
- That move an investment to a substantially similar product
- Related to opening different account types
- Made to older investors or those saving for retirement or college
For dual registrants, exams will focus on reviews of firms’ processes for identifying, mitigating, and eliminating conflicts of interest where dual registrants receive compensation or other financial incentives that may create conflicts of interest that must be addressed, account allocation practices, and account selection practices. Examinations may also assess broker-dealer supervision of sales practices at branch office locations.
Customer Relationship Summary (CRS)
The Division’s examination will include a review of how a broker-dealer describes the relationships and services it offers to retail investors, its fees and costs, its conflicts of interest, and whether the broker-dealer accurately discloses its financial professionals’ discipline history.
Risk Areas (Various Market Participants)
Cybersecurity/Operational Resiliency
Operational disruption risks remain elevated due to cybersecurity attacks, dispersed operations, weather-related events, and geopolitical concerns. Exams will assess whether registrants’ procedures and practices are reasonably managing information security and operational risks and evaluate how a registrant addresses risks from the use of third-party products and subcontractors for essential operations. In addition, the Division will focus on training and security controls that firms are employing to identify and mitigate new risks associated with artificial intelligence (AI).
Regulation S-P & S-ID
Exams will focus on policies and procedures, internal controls, oversight of third-party vendors, and governance practices as required by Regulations S-ID and S-P, including:
- Identification and detection to prevent and protect against identity theft during customer account takeovers and fraudulent transfers
- Practices to prevent account intrusions and safeguard customer records and information, especially for firms with multiple branch offices
- Firm training in identity theft prevention and if policies and procedures are reasonably designed to protect customer records and information. Examinations will also assess a firm’s efforts to address operational risk, as operational failures may impact a firm’s ability to safeguard customer records and information
In addition, examiners will ask about progress in preparing for soon-to-be-effective changes to Regulation S-P.
Resource: SEC Issues New Regulation S-P Rules
Emerging Technologies
The Division remains focused on the use of automated investment tools, AI technologies, and trading algorithms or platforms, and alternative sources of data. The Division will examine firms that employ automated investment advisory services, recommendations, and related tools and methods, and will assess if:
- Representations are fair and accurate
- Operations and controls in place are consistent with investor disclosures
- Algorithms produce advice consistent with investors’ investment profiles or stated strategies
- Controls to confirm that advice from digital engagement practices is consistent with regulatory obligations to investors, especially older investors
The Division will review registrant representations on AI capabilities or AI use for accuracy. The Division will assess whether firms have implemented adequate policies and procedures to monitor and/or supervise AI use, including tasks for fraud prevention and detection, back-office operations, anti-money laundering (AML), and trading functions.
Anti-Money Laundering (AML)
Similar to previous years, examiners will review whether broker-dealers and RICs are:
- Appropriately tailoring an AML program to their business model and associated AML risks
- Conducting independent testing
- Establishing an adequate customer identification program, including for beneficial owners of legal entity customers
- Meeting their suspicious activity report filing obligations
Conclusion
The asset management team at Forvis Mazars has more than 50 years of experience providing accounting, tax, and consulting services to various types of investment holdings, including conventional debt and equity investments, loans, businesses, alternative investments, and other unique assets. As of November 2025, Convergence Optimal Performance ranked Forvis Mazars as a top 15 accounting and audit firm to RIAs and ranked in the top 15 by assets under management (AUM). We have experience providing services to funds ranging from emerging managers to $100-plus billion in AUM. Our knowledge allows us to provide tailored services to help meet your unique needs. We provide services to private and public funds. For more information, please reach out to a professional at Forvis Mazars.