A new investment strategy, an acquisition or a change in service providers can introduce risks that an existing compliance program was never designed to address. The SEC’s fiscal year 2027 examination priorities put those changes, and how firms respond to them, under particular scrutiny.
For investment advisers, private fund managers, registered investment companies and broker-dealers, the report provides a useful opportunity to reassess where compliance resources are needed. Examiners will review fiduciary obligations, complex investments, cybersecurity and technology oversight, alongside the effectiveness of firms’ day-to-day controls.
The priorities do not create new legal obligations or cover every potential examination topic. They do, however, offer insight into the risks that will help guide the Division of Exams’ work.
Fiduciary Obligations Begin With the Details
For investment advisers, economic conflicts of interest remain a central focus. Examiners will assess whether financial incentives affect the impartiality of advice, including practices involving fee rebates, fee and expense calculations, and cash management.
Investment recommendations will also receive attention. The Division will evaluate whether advisers conduct reasonable due diligence and consider how a product’s liquidity, costs, risks and other characteristics align with the client’s circumstances. Retail and older investors, including those saving for retirement, remain an emphasis.
Advisers should consider testing a sample of fee calculations and recommendations against client agreements, disclosures and investment profiles. This can help identify discrepancies between what a firm describes to clients and what occurs in practice.
Private Funds & Complex Products Require Closer Review
The Division will prioritize advisers recommending investments that are illiquid, difficult to trade or unusually complex. Examples include private fund and business development company loans, investments in private companies through special purpose vehicles, and certain option-based, inverse and single-stock ETFs.
For private fund advisers, examinations will address risks at both the fund and investment levels. Areas of review include allocations, borrowing and fund-level credit lines, affiliated service providers, and the accuracy of fees and expenses.
Registered investment companies face related scrutiny. Examiners will focus particularly on fees and expenses and whether portfolio management practices align with investment strategies, fund filings and marketing materials. Funds holding private credit or other illiquid investments should also expect attention to valuation, redemptions and risk disclosures.
A practical starting point is to trace a complex investment through the firm’s process—from due diligence and approval to valuation, disclosure and ongoing monitoring—and assess whether the controls address its specific risks.
Compliance Programs Must Keep Pace With Growth
A compliance program that supported a firm several years ago may need substantial updates after an acquisition, expansion into new asset classes or the addition of new services.
The Division specifically identifies advisers that have changed business models, begun serving different clients, grown through mergers or acquisitions, or operate across geographically dispersed offices. Examiners will assess whether compliance programs have adapted and whether firms have addressed new conflicts.
Reviews will also cover core functions such as marketing, trading, valuation, custody, disclosures and filings, as appropriate, and will typically include the annual compliance review.
Firms should revisit significant business changes and confirm that relevant procedures, testing and responsibilities were updated. Any unresolved findings from prior reviews deserve attention, including documentation of corrective action.
Cybersecurity Reviews Will Examine Operational Readiness
Cybersecurity and operational resilience remain priorities, with examinations addressing governance, access controls, data loss prevention, account management, and incident response and recovery. The Division will also assess risks associated with third-party providers and shared technologies.
Under Regulation S-P, examiners will evaluate safeguards for customer information and incident response procedures, including customer notification and service provider oversight. Regulation S-ID reviews will focus on identity theft risks, particularly account takeovers and fraudulent transfers.
Firms should consider walking through a realistic incident involving a compromised account or vendor. Can employees identify the issue, escalate it to the appropriate people and carry out the response procedures? An exercise can expose gaps that are difficult to identify by reviewing a written plan alone.
Technology Oversight Extends Beyond Investment Tools
The report addresses advanced technologies used in investment analysis, customer management, compliance, trading and other business functions. It also highlights technology-enabled threats, including sophisticated phishing and deepfake voice or video used for social engineering.
For automated investment tools and algorithms, exams will generally assess whether representations are accurate, operations match disclosures and advice or recommendations are consistent with investor profiles or stated strategies.
Firms should understand which tools employees and vendors use, what information those tools access and who oversees their output. Training and verification procedures should also account for fraudulent requests that appear to come from a familiar client, colleague or executive.
Broker-Dealers Face Scrutiny Across Sales and Supervision
Broker-dealer priorities include financial responsibility, trading practices, Regulation Best Interest, anti-money laundering and supervision.
Regulation Best Interest reviews will address product, account and rollover recommendations; conflicts; reasonably available alternatives; and consideration of costs and customer investment profiles. Complex and illiquid products remain areas of interest, as do dual registrants and account allocation practices.
The Division will also assess whether supervisory systems address new business activities and products, with qualified individuals assigned appropriate authority. Broker-dealers should evaluate how their supervisory and AML programs have responded to growth, changing customer relationships and emerging risks.
Put the Priorities to Work
Start by identifying the priorities most relevant to your firm’s business and incorporating them into your risk assessment and testing schedule. Assign responsibility for any needed changes, set completion dates and retain evidence of testing and remediation.
Advisers that have never been examined, particularly recently registered firms, remain a priority. Those firms should assess their readiness before an examination notice arrives.
Adviser Compliance Consulting helps firms evaluate compliance programs, address gaps and prepare for regulatory exams through ongoing support, targeted reviews and mock SEC exams. Contact us to discuss how the 2027 priorities apply to your firm.
