SEC examiners will spend the next 12 months looking closely at how registered investment advisers make money from client accounts and how firms defend against cyberattacks powered by super intelligence, among other areas of high importance.
That's according to the agency’s fiscal 2027 examination priorities, released Friday.
The Securities and Exchange Commission’s Division of Examinations published its annual priority list a little over three weeks earlier in the calendar than last year’s, which was delayed at the time due to a federal government shutdown.
For advisors, much of the list will look familiar, with concerns around fiduciary duty, conflicts of interest and compliance program effectiveness again at the top. Some of the language has changed, including a shift from citing artificial intelligence to "super intelligence," or SI, for the next fiscal year.
“Examinations are one of the Commission’s most important tools for promoting compliance with the federal securities laws and helping protect investors,” SEC Chairman Paul S. Atkins said in a statement. “Examinations provide critical insight into emerging risks, evolving business practices, and market developments across our financial system.”
The division said it will prioritize reviews of advisers’ economic conflicts of interest, particularly whether financial incentives could undermine the impartiality of their advice. That covers fee rebates, fee and expense calculations, cash management, and quid pro quo arrangements, as well as deposits and withdrawals.
The focus builds on a June 9 risk alert, in which staff described conflicts that advisers either failed to disclose or disclosed in incomplete or misleading ways.
Examiners will also be evaluating how advisers build investment recommendations, checking whether a product’s liquidity, volatility, projected performance across market conditions, time horizon and costs, including the cost of exiting, fit a client’s profile and objectives.
Products that are hard to trade or have unusual features will get extra attention. According to the SEC's exam division, those will include loans by private funds or business development companies, option-based funds, inverse and single-stock ETFs, and ETFs built on less-liquid assets.
That scrutiny comes as the commission is also widening retail access to alternatives, including through the SEC’s recent proposals on interval funds and performance fees.
Firms going through change, including newly registered RIAs and firms that may be integrating into larger consolidators, are also on the radar. Specifically, the division singled out advisers that have changed business models, added new client types or asset classes, grown through M&A, or spread their operations across geographically dispersed branch offices.
"These inquiries help the Division assess whether these advisers – like all registered advisers – adhere to their fiduciary duty to clients," the SEC's exam unit said.
On the brokerage side, examiners will keep testing compliance with Regulation Best Interest, the SEC's conduct standard requiring broker-dealers to put retail customers’ interests ahead of their own when making recommendations. Reviews will focus on three areas: rollover and account-type recommendations, how firms evaluate reasonably available alternatives, and whether they weigh costs.
Among other product categories, the division said it would concentrate on variable and registered index-linked annuities, ETFs holding private equity or private credit, private placements, structured products and single-stock ETFs. Recommendations moving clients into substantially similar products, as well as those made to older investors, retirement savers, and investors saving for college will be getting a closer look.
Dual registrants will be reviewed on how they deal with conflicts driven by compensation, including how clients are steered toward brokerage, advisory or wrap fee accounts. Examiners will also check whether Form CRS, the plain-language relationship summary that brokers give retail investors, accurately discloses the disciplinary history of the firm and its representatives.
Anti-money laundering reviews will look at omnibus accounts held for foreign financial institutions, in which case the broker-dealer may not have visibility into the customer who ultimately owns or controls the accounts. The division said this work will be coordinated with the SEC Cross-Border Task Force’s efforts against pump-and-dump schemes.
The division will continue its risk-based oversight examinations of the Financial Industry Regulatory Authority, which according to the SEC oversees roughly 3,184 brokerage firms, 146,826 branch offices and more than 639,000 registered representatives.
The SEC’s reviews include inspections of FINRA’s major regulatory programs and oversight of FINRA’s own examinations of certain member firms. From there, the SEC makes detailed recommendations for improvement.
Cybersecurity remains a priority across all registrants. Examiners will review governance, data loss prevention, access controls and incident response, including response to ransomware, as the division said bad actors are increasingly using SI to automate their attacks. It will examine how firms prepare for SI-generated phishing and for deepfake voice and video used in social engineering.
Read more: There’s a high chance your family business clients have faced a cyber-attack, warns Deloitte
With respect to firms’ own use of SI, the exam division said it will review policies for monitoring the technology in four areas: fraud detection, back-office work, AML and Reg BI compliance, and trading. For automated advice tools, they will ask whether marketing claims are accurate and whether the algorithms produce recommendations consistent with clients’ profiles.
A central test under the cyber risk umbrella would be concern the SEC's amended Regulation S-P, which requires incident response programs, customer breach notification and oversight of service providers. Smaller RIAs, meaning those with less than $1.5 billion in assets under management, had until June 3 to comply.
Third-party risk is getting attention for a reason, as recent incidents involving vulnerable vendor software that put advisor client portals at risk have shown. Examiners will also check whether firms’ Regulation S-ID identity theft programs address account takeovers and stolen credentials.
“The markets we oversee continue to evolve rapidly, and the examination program must evolve with them,” said Keith Cassidy, director of the Division of Examinations.
“We needed to become a more agile and efficient organization,” said American Express CEO Stephen Squeri.
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