Dissecting the 2026 Examination Priorities

By Craig Moreshead, Managing Director

In the beginning of this year Commissioner Uyeda gave a speech announcing a “new beginning” returning the Commission to its narrow mission of facilitating capital formation, while protecting investors and maintaining fair, orderly, and efficient markets.  The SEC’s Fiscal Year 2026 Examination Priorities announced November 17, 2025, reaffirm this renewed focus on the SEC’s core mission and its four pillars of promoting compliance, preventing fraud, informing policy, and monitoring risk.

The SEC’s examination priorities in 2026 will focus on i) adherence to fiduciary standards of conduct, ii) high risk advisers and investment products, iii) effectiveness of compliance programs, iv) registered investment companies (RICs), v) information security and operational resiliency, vi) emerging technologies, and vii) anti-money laundering.  

Adherence to Fiduciary Standards of Conduct.  The SEC emphasized that adherence to duty of care and duty of loyalty obligations remains a priority.  Investment advice and related disclosures must take into account the advisers’ financial conflicts of interest in providing impartial advice (duty of loyalty).  When making recommendations an adviser must consider all relevant factors including the cost, the investment product’s or strategy’s investment objectives, characteristics and features, liquidity, risks and potential benefits, volatility, likely performance in a variety of market conditions, time horizon, and cost of exit (duty of care).  While not subject to registration with the SEC, ERAs are still subject to certain provisions and rules under the Advisers Act and other federal laws applicable to financial institutions. Although not routinely examined ERAs are subject to SEC examinations, and examinations of ERAs have led to enforcement cases in recent years.

High Risk Advisers. The SEC outlined the following types of investment advisers that will be the focus of examinations:

· Never examined advisers and recently registered advisers,

· Advisers to private funds that also advise separately managed accounts or registered funds (risk of favoritism in investment allocations and interfund transfers),

· Advisers to newly launched private funds or who have never before managed private funds (higher risk related to liquidity, valuation, fees, disclosures, differential treatment of investors, side letters etc.),

· Advisers who have merged or consolidated with or been acquired by existing advisory practices (may result in operational complexities or new conflicts).

High Risk Investment Products.  The SEC outlined the following high risk investment products that will be the focus of examinations:

· Alternative investments (e.g. private credit and funds with extended lock-up periods),

· Complex investments (e.g. ETF wrappers on less liquid strategies, option-based ETFs, leveraged and/or inverse ETFs),

· Advisory products and services provided to older investors.

Effectiveness of Compliance Programs. Examinations will focus on core areas of compliance including marketing, valuation, trading, portfolio management, disclosure and filings, and custody.   Policies and procedures will be reviewed to ensure they have been effectively implemented and enforced.  The adviser’s annual compliance reviews will be analyzed in accordance with regulatory requirements.  Advisers with new business models or new types of assets, clients or services can expect examiners to evaluate whether appropriate compliance practices have been adopted and implemented.

Registered Investment Companies. The SEC outlined the following RICs that will be the focus of examinations: 

· Never-before examined RICs or recently registered RICs,

· RICs that participate in mergers or similar transactions (risk of operational and compliance challenges),

· RICs that use complex strategies or have significant holdings of less liquid or illiquid investments (valuation risk and conflicts of interest),

· RICs with novel strategies or investments, including funds with leverage vulnerabilities.

Information Security and Operational Resiliency.  Examiners will evaluate the firm’s practices to prevent interruptions to critical services, including disruptions related to cybersecurity attacks, remote or dispersed operations, weather related events, and geopolitical concerns.  Firms should train staff and establish security controls to identify and mitigate new risks associated with artificial intelligence (AI) and polymorphic malware attacks.  The firm’s Identity Theft Prevention Program should include staff training and must be effectively designed and implemented to identify and detect red flags (particularly during customer account takeovers and fraudulent transfers).  Incident response programs must be designed to detect, respond to, and recover from unauthorized access to or use of customer information and comply with the new requirements under Regulation S-P (eff. 12/3/25 for large advisers, 6/3/26 for small and mid-size advisers).   

Emerging Financial Technology.  Advisers should expect examiners to focus on their use of automated investment tools, AI technologies, and trading algorithms or platforms.  The firm’s representations regarding AI capabilities and utilization must be accurate and consistent with the firm’s actual practices.  Adequate policies and procedures must be established and implemented to monitor and supervise the use of AI technologies.  Algorithms utilized in portfolio management will be evaluated to ensure they lead to advice or recommendations consistent with investor profiles and investment strategies.  Firms should have implemented controls (i.e. testing program) to confirm that advice resulting from automated tools is consistent with regulatory obligations to investors (especially retail and senior investors). 

Anti-Money Laundering Program and OFAC.  The Commission will continue to focus on AML programs and review whether broker-dealers and certain RICs have established an adequate customer identification program, including for beneficial owners of legal entity customers, and have tailored their AML program to their business model and associated AML risks (ex. risks associated with omnibus accounts maintained for foreign financial institutions).  Broker-dealers and certain RICs should ensure that they’re conducting independent testing and meeting their Suspicious Activity Report filing obligations. RICs should have policies and procedures for oversight of applicable financial intermediaries.  Broker-dealers, advisers, and RICs must ensure compliance with the Department of Treasury’s Office of Foreign Assets Control sanctions (OFAC).