SEC 2027 exam priorities target RIA fees, cash management and M&A 

The SEC’s Division of Examinations for 2027 will scrutinize how investment advisors handle economic conflicts of interest such as fee rebates, fee and expense calculations and cash management, as well as added compliance attention on M&A transactions. 

“These reviews will assess whether advisers’ financial conflicts may affect the impartiality of their advice in certain areas, such as fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, deposits, and withdrawals,” the SEC wrote in its exam priorities notice for 2027. 

Cash sweep programs have been a conflict of interest target for regulators, with Merrill Lynch agreeing to pay $39 million in a cash sweep settlement reported earlier this month. Robo-advisory firm Betterment has also faced a lawsuit this year that claimed the firm swept client cash into deposit accounts that paid no interest at all, thereby violating its fiduciary duty. 

“The SEC’s focus on economic conflicts follows where some of the deepest conflicts exist— indirect and often under-disclosed compensation,” said Lori Weston, head of compliance at STP Investment Services. “Sweep programs and cash allocations are easily overlooked because they tend to be treated as operational, but they can present economic conflicts that warrant detailed review.” 

Private fund advisors face added review of fee and expense calculations. Specifically, the SEC says it will examine the “use of debt and fund-level lines of credit, use of affiliated service providers, and the accuracy of fee and expense calculations at both the fund and investment levels,” regarding alternative, private funds surfaced by advisors. 

“The specific reference to investment-level fees and expenses is particularly noteworthy because it suggests continued examination attention to whether expenses associated with particular investments are appropriately calculated, allocated, and disclosed,” said Robert Baker, managing director and co-lead of mock examination at ACA Group, a compliance consultancy for RIAs. 

M&A draws scrutiny 

The SEC put the RIA M&A boom under the microscope in its 2026 priorities, and M&A remains mentioned in the 2027 report.  

The Division will assess whether, as appropriate, the adviser has adapted its compliance program in response to these changes and whether it has identified and made any necessary changes to address new conflicts of interest,” the SEC said regarding M&A. 

Examiners will prioritize advisors that have grown through mergers or acquisitions, operate from dispersed branch offices, or have taken on new client types, asset classes or services. 

“Firms in these categories should carefully evaluate how the change affects their compliance program, risk assessment, and conflicts, document that analysis, and reflect it in their next annual compliance review,” Weston said. 

Private credit valuations under the lens 

Building on the 2026 priorities’ focus on fiduciary duty and private credit, the division now expressly cites the reasonableness of advisors’ valuation methodologies. Illiquid products drawing heightened attention now include loans from private funds or business development companies and private company stakes held through special purpose vehicles. 

“Private credit is a natural area of focus given its valuations through 2026, and industry talk of mounding default risk within private credit funds,” said Sheridan Porter, co-founder of FEV Analytics, a provider of daily valuations for illiquid private assets. “Valuation must be estimated via deterministic models rather than AI – traceability, testability and a long track record is critical for valuation and default risk modeling.”