SEC’s 2027 exam priorities for advisers and broker-dealers

On October 23, 2026, the U.S. Securities and Exchange Commission’s (SEC) Division of Examinations (Division) released its Fiscal Year 2027 Examination Priorities (the Priorities Report). The annual publication identifies the practices, products, and services that the Division believes present heightened risks to investors or to the integrity of the U.S. capital markets and will guide examinations over the next year. Note that while this client alert focuses on investment advisers and broker-dealers, the Priorities Report also addresses investment companies, self-regulatory organizations, clearing agencies, municipal advisors, transfer agents, funding portals, and security-based swap entities.

The Priorities Report follows the Division’s September 2026 risk alert on annual compliance reviews and the Division of Investment Management’s statement on fair value measurement and disclosure for private assets. Earlier in October, the Division also published “The SEC Exam Handbook: A Practical Guide on Process and Engagement,” which replaces the prior examination brochure and provides a roadmap for each stage of an examination. Taken together, these provide insight into what registered entities may anticipate in the year ahead. For an overview of this recent SEC guidance and proposed rulemaking, see our recent client alert on regulatory considerations for investment advisers.

The Priorities Report focuses on the Division’s core priorities, including fiduciary duties, conflicts of interest, and compliance program effectiveness, along with attention to private credit, illiquid products, and artificial intelligence, referred to in the Priorities Report as “super intelligence” (SI). The Division stresses that the priorities are not exhaustive and may shift in response to new or emerging risks, products, market events, or investor concerns.

Investment advisers: Fiduciary duty and conflicts

The Division continues to focus on whether advisers adhere to their fiduciary duties, particularly with respect to retail and older investors. Examiners will review whether advisers have made full and fair disclosure of material facts, conducted reasonable due diligence on recommendations, evaluated the effectiveness of their compliance policies, and assessed the reasonableness of their valuation processes.

The Division will continue to prioritize advisers’ fiduciary obligations relating to economic conflicts of interest. Building on its June 9, 2026 risk alert on economic conflicts of interest, the Division will assess whether financial conflicts may affect the impartiality of advice in areas such as fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, deposits, and withdrawals, consistent with recent SEC enforcement actions (see our recent client alert on regulatory considerations for investment advisers).

Examiners will also evaluate whether recommended products and strategies are consistent with client profiles, objectives, and risk tolerance, considering liquidity, risk, volatility, time horizons, and costs, including exit costs. Priority will be given to advisers recommending illiquid, hard-to-trade, or unusual products, including private fund and business development company loans, private company investments through special purpose vehicles, exchange-traded funds (ETFs) based on less liquid assets, option-based funds, inverse and single-stock ETFs, and zero-days-to-expiration options.

Private fund advisers and third-party reliance

For private fund advisers, examiners will assess investment-related risk disclosures for consistency with fiduciary standards and whether controls address both fund-level and investment-level risks, including disclosures on investments and allocations, use of debt and fund-level lines of credit, affiliated service providers, and the accuracy of fee and expense calculations at both the fund and investment levels. Given the Division of Investment Management’s recent emphasis on calibration and disclosure of non-accruals and payment-in-kind interest in private credit valuations, advisers should expect valuation to be a key area in examinations.

The Division will also focus on advisers relying on third-party service providers that access client accounts, where existing controls may be insufficient to protect client assets and data. Firms using proxy advisory firms should expect examiners to assess how they evaluate recommendations, identify conflicts, and satisfy applicable legal obligations.

Investment advisers: Compliance programs

Compliance program effectiveness remains central to every examination. Examiners will review core program components, including marketing, valuation, trading, portfolio management, disclosure and filings, and custody, and will typically analyze the adviser’s annual compliance review, following the September 2026 risk alert’s findings on deficient annual reviews under Advisers Act Rule 206(4)-7.

The Division will also prioritize advisers that have undergone significant change, such as new business models, client types, asset classes or services, mergers or acquisitions, and operations across geographically dispersed branch offices, assessing whether compliance programs have adapted and whether new conflicts have been addressed. Activist advisers should expect review of the timeliness and accuracy of filings under Schedules 13D and 13G and Forms 13F, 13H, 3, 4, 5, and N-PX. The Division will continue to prioritize never-examined advisers, with emphasis on recently registered advisers.

Broker-dealers: Retail sales practices and Regulation Best Interest

The Division will continue to examine sales practices for compliance with Regulation Best Interest (Reg BI), focusing on product, strategy, account, and rollover recommendations; conflict mitigation; reasonably available alternatives; and the Disclosure and Care Obligations, particularly for complex or higher-risk products. Products of particular interest include variable and registered index-linked annuities, ETFs and other products investing in illiquid assets such as private equity or private credit, low-priced and small-cap securities, zero-days-to-expiration options, single-stock ETFs, private placements, structured products, and alternative investments.

Examiners will also review recommendations to move investments into substantially similar products or to open option or margin accounts or self-directed IRAs, as well as recommendations made to older and vulnerable investors. 

Dual registrants remain a priority, including account selection and allocation practices and Form CRS disclosures. The Division will also review supervision of payments to unregistered finders and personal-service entities.

Broker-dealers: Financial responsibility, trading, and AML

Examinations will continue to prioritize the Net Capital Rule (SEC Rule 15c3-1) and Customer Protection Rule (SEC Rule 15c3-3), including recent amendments relating to daily customer reserve computations and U.S. Treasury clearing, as well as liquidity risk management and prime brokerage concentration and counterparty risks. For firms offering extended-hours trading, examiners will review operational challenges, liquidity provider availability, best execution, and the valuation of illiquid instruments.

The Division will review anti-money laundering (AML) programs to assess whether they are tailored to the firm’s risks, with attention to foreign omnibus accounts and “nested” relationships, independent testing, “pump-and-dump” and “ramp-and-dump” schemes involving foreign-based companies (coordinated with the SEC’s Cross-Border Task Force), ongoing customer due diligence, and Suspicious Activity Report obligations. Examiners will also review compliance with sanctions administered by the Office of Foreign Assets Control and whether supervisory systems are reasonably designed, including for new business activities and products.

What all registered entities should expect: Cybersecurity, super intelligence, and data protection

Cybersecurity remains a key priority, with examinations covering governance, data loss prevention, access controls, account management, incident response and recovery (including ransomware), and third-party and shared technology risks.

The Division is placing new emphasis on SI. Noting that bad actors are using SI to automate and accelerate cyberattacks, examiners will assess preparation for SI-related threats, such as SI-generated phishing and synthetic or deepfake voice and video used for social engineering, and will review policies and procedures for monitoring SI used in fraud prevention, back-office operations, AML and Reg BI compliance, and trading. For automated advisory tools and algorithms, examiners will consider whether representations are fair and accurate, whether operations and controls match disclosures, and whether algorithms produce advice consistent with investor profiles or stated strategies.

Under amended Regulation S-P, examiners will evaluate safeguards, incident response, customer notification, and service provider oversight. Under Regulation S-ID, examiners will focus on red flags associated with account takeover and fraudulent transfers and assess whether identity theft prevention programs address emerging risks such as SI and stolen credentials.

Key takeaways for 2027

To prepare for examinations in the coming year, registered entities should consider:

• Conducting gap analyses against the Priorities Report and enhancing policies, procedures, documentation, and training
• For advisers, reviewing economic conflicts, including fee rebates, cash sweep and cash management arrangements, and fee and expense calculations, and confirming that disclosures are consistent with practice
• For advisers, ensuring annual compliance reviews are timely, substantive, documented, and followed by corrective action
• Reviewing valuation policies for private credit and other illiquid assets, including calibration practices and disclosure of non-accruals and payment-in-kind interest
• Reassessing suitability and Reg BI documentation for complex, illiquid, and higher-risk products, particularly for older and retirement investors
• Confirming compliance programs have been updated following mergers, acquisitions, new products, or business model changes
• Updating cybersecurity, Regulation S-P, and Regulation S-ID programs to address SI-enabled threats such as deepfakes and phishing, and strengthening vendor and third-party oversight
• Assessing and supervising SI tools used in advisory, trading, compliance, and back-office functions, and confirming related representations are accurate
• For broker-dealers, reviewing AML controls for foreign omnibus accounts and supervision of finders and unregistered personal-service entities

By taking these steps, registered entities can better position themselves to meet SEC expectations in 2027.

Client Alert 2026-207