On October 23, 2026, the U.S. Securities and Exchange Commission (SEC) Division of Examinations (EXAMS) released its annual examination priorities for the 2027 fiscal year, signaling a strategic shift and continued focus on areas perceived as carrying the highest risk for investors and market integrity. This comprehensive document outlines the thematic areas that EXAMS will scrutinize across investment advisers, investment companies, broker-dealers, and other market participants, building upon core themes from the previous year while introducing new areas of emphasis. The 2027 Priorities underscore a sustained commitment to upholding robust standards of care, safeguarding information security, and ensuring operational resiliency, all while navigating the evolving landscape of complex financial products and burgeoning technologies.
The release of these priorities is a critical annual event, providing market participants with advance notice of the SEC’s examination agenda. This proactive disclosure aims to foster compliance and encourage firms to self-assess and enhance their internal controls and procedures. The 2027 document, a continuation of this practice, reflects the SEC’s ongoing efforts to adapt to market developments and investor protection needs. It is particularly noteworthy for its heightened attention to artificial intelligence (AI) and its application within the financial services sector, a trend that has been gaining significant traction in recent years.
Core Themes and Emerging Focus Areas
Many of the foundational priorities from the 2026 examination cycle have been retained, indicating a stable, long-term regulatory vision. These include the paramount importance of registrants’ standards of care, robust information security measures, and steadfast operational resiliency. The inherent risks associated with alternative and complex products and investment strategies continue to be a significant concern for regulators. However, the 2027 Priorities introduce several notable evolutions.
Firstly, there is a pronounced and explicitly stated increase in the focus on artificial intelligence (AI). The SEC report refers to AI in broad terms, sometimes using the descriptor "super intelligence" (SI), highlighting the transformative potential and associated risks of this technology within the financial ecosystem. This signifies a regulatory acknowledgment of AI’s growing influence, from investment analysis and customer service to the potential for sophisticated cyber threats.
Secondly, new areas of focus have been introduced. These include a detailed examination of advisers’ reliance on proxy advisory firms, assessing the diligence and appropriateness of such dependencies. Furthermore, the priorities emphasize compliance with newly enacted rules or significant amendments to existing regulations, underscoring the SEC’s commitment to ensuring market participants adhere to the latest regulatory frameworks. This includes a keen interest in how firms implement and comply with changes to established rules, ensuring that the spirit and letter of the law are followed.
Investment Advisers: Upholding Fiduciary Duty and Navigating Complexity
For investment advisers, the adherence to fiduciary standards of conduct remains a cornerstone of the SEC’s examination agenda. This involves a deep dive into advisers’ duties of care and loyalty, with a particular emphasis on services provided to retail investors and those planning for retirement. While the general scrutiny of fiduciary obligations is not new, the 2027 Priorities notably highlight an explicit focus on advisers’ fiduciary duties concerning economic conflicts of interest. This suggests a heightened awareness of situations where an adviser’s financial interests might diverge from those of their clients.
EXAMS will meticulously evaluate how advisers formulate investment advice, ensuring that product characteristics genuinely align with client profiles and mandates. A significant area of concern will be advisers recommending products that are illiquid, difficult to trade, or possess unusual features. This focus is particularly relevant given the increasing popularity of alternative investments.
The examination of valuation processes and methodologies will also be intensified. EXAMS specifically flagged loans made by private funds and business development companies, as well as investments in private companies through special purpose vehicles, as examples of difficult-to-trade or illiquid products that will be under scrutiny. Advisers managing private credit and other illiquid strategies can anticipate rigorous examination of how these holdings are valued, and whether liquidity and exit costs are adequately weighed and disclosed to investors during the recommendation phase.
For private fund advisers, the SEC will assess the comprehensiveness of risk disclosures and the robustness of controls designed to mitigate both fund-level and investment-level risks. This includes evaluating the use of debt, fund-level lines of credit, reliance on affiliated service providers, and the accuracy of fee and expense calculations at both tiers. Furthermore, advisers that utilize third parties to access client accounts, and those that depend on proxy advisory firms, will face close examination regarding their evaluation of proxy recommendations and the fulfillment of applicable legal obligations.
A persistent priority for EXAMS is the examination of advisers who have never undergone an SEC inspection, with a particular emphasis on recently registered entities. These initial examinations are designed to assess overall regulatory compliance and the effectiveness of an adviser’s processes for identifying, addressing, and disclosing risks and potential conflicts. Newly registered private fund advisers are advised to anticipate that conflict and fee/expense themes will be central to these inaugural reviews.
The effectiveness of advisers’ compliance programs continues to be a significant focus. EXAMS will assess program components related to marketing, valuation, trading, portfolio management, disclosure, and custody. Reviews will prioritize whether policies addressing conflicts of interest are reasonably designed and effectively implemented, and whether disclosures adequately address fee-related conflicts arising from compensation structures tied to accounts and products. Advisers that have undergone significant business model changes, experienced growth through mergers or acquisitions, or operate from multiple dispersed branch offices will also be under particular scrutiny, reflecting a new emphasis on firms with complex operational structures. These areas of focus are consistent with guidance provided in the new SEC Exam Handbook.
Investment Companies: Navigating Complex Products and Evolving Strategies
Registered investment companies (RICs) continue to be a priority for EXAMS, given their widespread impact on retail and older investors. The focus will be on RIC operations concerning fees and expenses, and on ensuring that portfolio management practices and related disclosures align with stated investment strategies, fund filings, and marketing materials.
Emerging areas of interest for EXAMS within the investment company space include RICs holding complex products and less liquid or illiquid investments, such as private credit. This will involve scrutiny of associated valuation, redemption, and conflict-disclosure issues. Other developing areas include RICs employing novel or complex investment strategies, particularly those with leverage vulnerabilities, such as business development companies and inverse and leveraged ETFs. Additionally, RICs operating under exemptive orders will be examined for their implementation and compliance with the terms of those orders.
Broker-Dealers: Financial Responsibility, Trading Practices, and Retail Sales
For broker-dealers, EXAMS will maintain a strong focus on financial responsibility rules, specifically the Net Capital Rule and the Customer Protection Rule, along with associated controls. These examinations may also extend to federal and Financial Industry Regulatory Authority (FINRA) margin regulations, which are intrinsically linked to net capital and customer protection requirements. A new inclusion in staff priorities is the assessment of recent amendments to the Customer Protection Rule, particularly those pertaining to daily customer reserve computations and U.S. Treasury clearing.
EXAMS will also evaluate credit, market, and liquidity risk management controls. The emphasis will be on whether firms possess sufficient liquidity to navigate stress events and maintain compliance with net capital and customer protection rules. Prime brokerage activities will be reviewed for concentrations, liquidity, and counterparty credit risks.
Trading-related practices and services are also a key area. Equity and fixed-income trading practices remain a priority. With the proliferation of extended trading hours, EXAMS will examine the operational challenges associated with these periods, assess the readiness and capacity of liquidity providers on and off-exchange, and review related market and credit risk controls. Best execution and the pricing of illiquid instruments will also be under review.
Compliance with Regulation Best Interest (Reg BI) continues to be a paramount concern in retail sales practices. EXAMS will concentrate on complex products and strategies, including variable and registered index-linked annuities, ETFs investing in illiquid assets, low-priced and small-capitalization securities, zero-days-to-expiration options, single-stock or focused-market ETFs, private placements, structured products, and alternative investments. The SEC will also evaluate recommendations that involve moving investments to substantially similar products, opening different account types (e.g., options, margin, or self-directed IRA accounts), or targeting older and vulnerable investors. Examinations of dual registrants will also remain a priority.
A notable enhancement in the 2027 Priorities is the expanded, dedicated section on Anti-Money Laundering (AML) for broker-dealers. Previously situated within cross-cutting risk areas, AML now receives its own prominent focus. The 2027 Priorities specifically highlight a concentration on foreign accounts and trading in foreign-based companies. This includes evaluating compliance with AML requirements designed to address heightened risks associated with foreign financial institution omnibus accounts and controls aimed at mitigating manipulation risks in trading foreign-based companies. EXAMS has explicitly stated that it will coordinate with the SEC’s Cross-Border Task Force on these matters.
Supervision receives a new, standalone section, reflecting its increased importance. EXAMS will assess whether broker-dealers, funding portals, municipal advisers, and security-based swap dealers maintain supervisory systems and controls that are reasonably designed to achieve compliance, particularly for new business lines and products. The evaluation will also include whether qualified individuals hold supervisory authority.
Risk Areas Affecting Multiple Market Participants: Technology and Safeguards
Several risk areas identified by EXAMS transcend individual market participant categories, impacting a broader range of registrants.
Emerging Financial Technologies
EXAMS acknowledges the increasing integration of AI into various aspects of registrants’ operations, including investment analysis, customer management, and software development. Simultaneously, threat actors are leveraging AI to accelerate cyberattacks. Consequently, examinations will focus on preparedness for AI-related cyber threats and the policies governing the use of AI in fraud detection, back-office operations, AML and Reg BI compliance, and trading. The review of automated investment tools, trading algorithms, and alternative data sources remains a priority.
Cryptoassets and Tokenization
Registrants involved in offering, recommending, trading, or servicing crypto or tokenized products should anticipate continued examination by EXAMS. These activities will be assessed under existing frameworks pertaining to standards of conduct, disclosure, custody, and operational resiliency, indicating that the regulatory approach to digital assets is to apply established principles rather than creating entirely new frameworks.
Regulation S-P
EXAMS will concentrate on whether firms have developed and implemented reasonably designed policies and procedures in accordance with Regulation S-P. This includes evaluating response program policies and procedures for unauthorized access to or use of customer information, encompassing customer notification protocols and oversight of service providers. The review will also cover how firms are addressing operational risk in their efforts to safeguard customer information, a critical component of data security and privacy.
Regulation Systems Compliance and Integrity (SCI)
Examinations under Regulation SCI will address emerging trends such as AI, tokenization, extended trading hours, and quantum computing. A key focus will be on SCI entities’ reliance on cloud services and other third-party vendors, highlighting the interconnectedness of modern financial infrastructure and the associated risks.
The release of the 2027 Examination Priorities by the SEC’s Division of Examinations signifies a dynamic regulatory environment that demands constant vigilance and adaptation from financial market participants. The emphasis on AI, complex products, and fiduciary duty reflects a forward-looking approach to investor protection in an increasingly sophisticated and technologically driven financial landscape. Firms are urged to review these priorities thoroughly and to proactively assess and strengthen their compliance programs to meet the SEC’s expectations.
