Record Deals, Rising Scrutiny
By John Canning, Managing Director
The registered investment adviser industry has gone through a period of considerable mergers and acquisitions over the last couple of years. Record consolidation over this period has been driven predominantly by private equity. According to DeVoe, 2025 was the most active year in RIA merger and acquisition history with 322 announced deals beating 2024's record of 272. [1] ECHELON Partners reported the first quarter of 2026 set a quarterly record of 142 deals and $1.67 trillion in AUM changed hands.[2] Second quarter of 2026 saw 120 deals and $378 billion total transacted AUM. PE-backed acquirers made 91 of the 120 deals (75.8%, an all-time high). A theme that is developing is that activity is consolidating around repeat buyers. 24 serial buyers accounted for 62.5% of volume. The median target was $733 million.[3]
Deal types include tuck-ins (or add-on acquisitions) by serial acquirers, mega-deals (for example LPL buying the $31 billion Mariner Advisor Network), and PE recapitalizations such as Allworth, Harbourfront and Farther (it is anticipated that management will use these capital raises as fuel for future M&A).
You may be asking why this matters for compliance: every deal combines two compliance programs, two sets of client contracts, two tech stacks and new conflicts. And of course, the SEC is watching!
Regulatory Focus: SEC Fiscal Year 2026 Exam Priorities
The Division of Examinations says it will focus on particular types of advisers and advisory services or business practices that may create additional risks and potential or actual conflicts of interest. This list includes advisers that have “merged or consolidated with or been acquired by existing advisory practices.” The reason is that these deals can bring operational and compliance complexity and new conflicts of interest.
On June 9th, the SEC’s Division of Examinations issued a risk alert pertaining to investment adviser obligations related to economic conflicts of interest. As fiduciaries, investment advisers have an obligation to eliminate or at least to expose through full and fair disclosure, all conflicts of interest which might incline an investment adviser— consciously or unconsciously—to render advice which was not disinterested. The staff noted that the Division of Examinations continues to observe compliance issues when advisers have economic conflicts of interest with their clients. This topic has been, and continues to be, an area that warrants routine review by the staff during adviser examinations. The staff stated that advisers should also identify and address timely new conflicts of interest. In addition, the Division encourages advisers to review their disclosures regarding their economic conflicts of interest to ensure that clients are provided with full and fair disclosure.
Advisers who are pursuing mergers and acquisitions or considering selling and merging an advisory business with an existing advisory practice should consider the following.
Compliance Focus Areas
Pre-close Regulatory Due Diligence
Exam and enforcement history: Review deficiency letters, responses, open remediation, regulatory inquiries, litigation, complaints and Form U4/U5 disclosures.
Form ADV accuracy: Check parts 1, 2A, and 2B against actual practice (fees, conflicts, custody, disciplinary history). Watch for inherited misstatements.
Compliance program quality: Review the policies manual, recent annual reviews, testing evidence, the CCO’s resources and independence, and the code of ethics and personal trading records.
High risk-areas: fee billing accuracy, custody and the surprise exam, Marketing Rule (testimonials, hypothetical and extracted performance), off-channel communications and recordkeeping, cybersecurity incidents, and state versus SEC registration status of the target.
Representations, warranties and indemnities: Tie diligence findings to the deal documents and to escrow.
Assignment and Client Consent
Under section 205(a)(2), advisory contracts cannot be assigned without client consent. A change of control is an assignment by operation of law, whether the deal is structured as a merger, equity sale or asset sale.
Decide between negative consent and affirmative consent based on contract terms, client type and state law. ERISA plans, registered funds and private fund LPAs often need more. Track consents and document everything.
Registered funds: A change in control ends the investment advisory agreement under section 15(a)(4) of the Investment Company Act of 1940. The board and shareholders must approve the new agreement. Consider interim investment advisory agreements under Rule 15a-4 and the section 15(f) safe harbor (75% independent board for 3 years; no “unfair burden”)[4].
Private funds: Check LPA consent and LPAC provisions and key-person clauses.
Evaluation of Conflicts
Pressure for revenue and growth targets, and changes to compensation.
Movement toward proprietary or affiliated products, platforms or custodians, and revenue sharing.
Retention bonuses and earn-outs tied to AUM, which creates incentives around asset retention or rollovers.
Allocation and fee conflicts across legacy and acquired client bases.
Actions: update the conflicts inventory and disclosures, and have compliance involved in designing compensation structure and compensation plans.
Registration Status and ADV Filing
A change in ownership resulting in no change of control can typically be handled via a “succession by amendment”, which is a Form ADV amendment that must be filed within 30 days of the ownership change.
If the ownership change results in a change of control then a “succession by registration” must be filed, which is essentially a new registration application on Form ADV and will be subject to review and approval by the SEC.
Control is presumed at 25% ownership.
Post-Close Integration (usually where exam findings come from)
Harmonize policies: Pick one manual and map legacy procedures to it. Set a timeline for interim reliance on legacy procedures and document it.
Fee billing: Check contract terms, breakpoints and householding when accounts move to new billing systems. This is a common source of over billing and refunds.
Books and records: Preserve the target’s records for the Rule 204-2 retention periods, including electronic communications, and identify who holds them.
Performance and marketing: check whether predecessor performance can be used (portability requirements under the Marketing Rule) and update rebranded materials and websites.
Code of Ethics: Onboard Access Persons, collect initial holdings reports within 10 days, and update restricted lists.
Trading: Transition cross-trade, principal-trade, aggregation and allocation, best execution and custodian processes.
Cyber and Reg S-P: Map data, oversee vendors, set up access controls, and apply the amended Reg S-P incident response program and 30-day customer notice requirement.
Supervision: Onboard new IARs and outside business activities, implement heightened supervision where warranted, and give training.
Annual Review (Rule206(4)-7): Test integration areas specifically in the first review after closing. Examiners read it.
Governance and the CCO Role
Keep compliance adequately resourced as the firm grows, give the CCO a seat in deal committees, and set board and owner reporting on integration status.
Consider building a 30/60/90-day and one year integration plan with owners and evidence of completion.
Bottom Line
The SEC has explicitly flagged mergers and acquired advisers for exam attention in fiscal year 2026. Be prepared for the “knock on the door” and a focused exam pertaining to the merger or acquisition. In most deals, the acquirer inherits the targets compliance history. The compliance risk in an RIA deal is often highest after closing, during integration. Seek a consultant’s help to ensure disclosures are updated, policies and procedures are properly adopted, and high risk areas are all addressed.
[1] https://www.devoeandcompany.com/deal-books/q4-2025-deal-book-download
[2] https://www.echelon-partners.com/echelon-partners-reports-record-breaking-ria-ma-activity-in-the-first-quarter-of-2026-with-142-transactions-and-1-67-trillion-in-aum-transacted/
[3] https://www.prnewswire.com/news-releases/echelon-partners-reports-the-most-active-second-quarter-on-record-for-ria-ma-with-120-transactions-and-378-billion-in-aum-transacted-302835940.html
[4] An investment adviser to a registered fund, or an affiliated person of that adviser, "may receive any amount or benefit" from a sale of the adviser's securities or other interests, even if the sale assigns the advisory contract. (A corporate trustee doing an adviser's job is covered the same way.) Two conditions apply.
