On October 23, 2026, the SEC announced its Fiscal Year 2027 Examination Priorities. The Division of Examinations continues to emphasize investment advisers’ fiduciary duties, effective compliance programs, conflicts of interest, and protection of client assets and information. The 2027 priorities have an increased emphasis on economic conflicts, illiquid and complex investments, private fund risks, proxy advisory firms, and compliance programs as advisers grow or change their business models. 

The practical compliance takeaway: written policies alone are not enough. Examiners will assess whether policies fit the adviser’s business, are implemented in practice, are supported by adequate disclosures, and effectively identify and address conflicts and existing and emerging risks.

Fiduciary duties and standards of conduct

The SEC continues to emphasize the duties of care and loyalty, especially when advisory practices affect retail investors, older investors, and individuals saving for retirement. The SEC will: 

·       Economic conflicts of interest: Examine whether conflicts affect the impartiality of advice involving fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, deposits, and withdrawals.

·       Investment recommendations and due diligence: Assess whether recommendations and product or strategy characteristics align with clients’ investment objectives, risk tolerance, financial circumstances, and other mandates. Examiners may assess liquidity, risk profile, volatility, projected performance across market conditions, time horizons, and costs.

·       Complex, illiquid, and higher-risk investments: Closely review loans by private funds or business development companies (BDCs), investments in private companies through special purpose vehicles, ETFs based on less-liquid assets, option-based funds, inverse ETFs, single-stock ETFs, and zero-days-to-expiration options.

·       Private fund advisers: Review investment-risk disclosures and controls for fund-level and investment-level risks, including allocations, debt and fund-level credit lines, use of affiliated service providers, and fee and expense calculation accuracy.

·       Third-party access to client accounts: Examine whether controls adequately safeguard client assets and data when service providers have account access.

·       Proxy advisory firms: Assess whether advisers review recommendations and their underlying basis, identify potential conflicts, and determine whether relying on these firms satisfies applicable legal obligations.

Compliance program effectiveness

The SEC will continue assessing compliance program effectiveness, including the annual compliance review and policies and procedures covering, as applicable, marketing and advertising, valuation, trading and portfolio management, disclosures and regulatory filings, custody, and conflicts of interest—especially those involving fees and compensation.

The SEC will scrutinize compliance practices as advisers change business models, serve new client types, add asset classes or services, grow through mergers or acquisitions, or operate through geographically dispersed branch offices. Examiners will assess whether compliance programs have adapted and whether advisers have identified and addressed new or changed conflicts.

For advisers engaged in activist activities, the SEC will review whether applicable Schedules 13D and 13G and Forms 13F, 13H, 3, 4, 5, and N-PX are timely and accurate. 

Never-examined advisers, especially recent registrants

The SEC will continue prioritizing advisers that have never been examined, particularly those recently registered. Reviews may assess regulatory compliance and how advisers identify, address, and disclose risks and conflicts of interest.

Other examination priorities affecting investment advisers

Beyond adviser-specific priorities, the SEC will focus on three areas that affect multiple categories of registrants.

• Cybersecurity: information security and operational resilience

The SEC will assess firm policies and procedures for governance, data-loss prevention, access controls, account management, incident response and recovery, and risks from use of third-party service providers and shared technologies. 

• SI and other emerging technologies

Advisers and threat actors increasingly use super intelligence (SI). Examiners will assess how advisers evaluate and prepare for potential SI-related cyberattacks, including SI-generated phishing and deepfake impersonation. They will also review policies and procedures governing SI use in fraud prevention and detection, back-office operations, AML compliance, and trading.

The SEC continues to scrutinize advisers’ use of automated investment tools, trading algorithms and platforms, and risks from emerging technologies and alternative data sources. Reviews will assess whether related representations and disclosures are fair, accurate, and consistent with operations and controls, and whether algorithm-driven advice or recommendations align with clients’ investment objectives.

•  Regulations S-P and S-ID

Under Regulation S-P, the SEC will assess advisers’ evaluation of technology risks and implementation of reasonably designed policies and procedures for safeguarding customer information, responding to incidents, notifying customers, and overseeing service providers. 

The SEC will also assess identity-theft prevention procedures under Regulation S-ID, including their ability to detect and respond to account takeovers, fraudulent transfers, stolen credentials, and emerging SI-related threats.

This information is only a summary of the SEC’s 2027 examination priorities. Investment Advisers should not rely on this summary for compliance with any rule.

For more information regarding SEC examinations, please contact: info@advisorsolutionsgroup.com