Who may be interested: Registered Investment Companies; Directors of Registered Investment Companies; Investment Advisers
Quick Take: The staff of the SEC Division of Examinations (Staff) recently released its 2026 examination priorities. As in prior years, the Staff emphasized examinations centered on core obligations relating to compliance programs, governance practices, fiduciary duties, and accurate disclosures to investors.
In its release, the Staff identified a broad range of examination priorities, which covered various market participants.
Registered Funds
The Staff will prioritize multiple focus areas specific to registered investment companies (funds). As in previous years, the Staff will continue its perennial focus on compliance programs, governance practices, disclosures to investors and accuracy of reporting to the SEC. This year, the Staff will evaluate:
- fund fees and expenses, including waivers and reimbursements; and
- portfolio management practices and consistency of disclosures with investment strategies or approaches, marketing materials, and the amended Names Rule.
The Staff will also continue to monitor developing areas of interest, including:
- oversight of valuation, liquidity, leverage, and conflicts for funds with significant exposure to less liquid assets or complex strategies;
- operational and compliance challenges associated with mergers or reorganizations; and
- funds with novel strategies or investments, including funds with leverage vulnerabilities.
The Staff will also continue to prioritize examinations of funds that have never been examined or have not been examined in a number of years.
Investment Advisers
As noted above, the Staff reiterates that adherence to an adviser’s fiduciary duties of care and loyalty remains a central focus. In this respect, the Staff stated that it would prioritize reviewing:
- investment advice and disclosure provided to clients for consistency with their fiduciary obligations, such as (1) the impact of advisers’ financial conflicts of interest on providing impartial advice; (2) advisers’ consideration of the various factors associated with their investment advice, such as generally the cost, investment product’s or strategy’s investment objectives, characteristics (including any special or unusual features), liquidity, risks and potential benefits, volatility, likely performance in a variety of market and economic conditions, time horizon, and cost of exit; and (3) advisers seeking best execution with the goal of maximizing value for their clients under the particular circumstances occurring at the time of the transaction;
- investment products that are alternative investments (e.g., private credit and private funds with investment lock-up for extended periods), complex investments (e.g., exchange traded funds (ETF) wrappers on less liquid underlying strategies, option-based ETFs, and leveraged and/or inverse ETFs), or higher-cost investment products (e.g., high commissions and higher investment expenses than similar products/investments); and
- investment recommendations for consistency with product disclosures and the clients’ investment objectives, risk tolerance, and financial/personal backgrounds, with emphasis on: (1) recommendations to older investors and those saving for retirement; (2) advisers to private funds that are also advising separately managed accounts and/or newly registered funds (e.g., reviewing for favoritism in investment allocations and interfund transfers); (3) advisers to newly launched private funds; (4) recommendations of certain products that may be particularly sensitive to market volatility; and (5) advisers that have not previously advised private funds (e.g., reviewing for regulatory awareness, liquidity, valuation, fees, disclosures, and differential treatment of investors, including use of side letters).
The Staff will continue to focus examinations on an adviser’s compliance program, which may include:
- evaluations of the core areas of advisers’ compliance programs which include, as applicable and appropriate for each examination, marketing, valuation, trading, portfolio management, disclosure and filings, and custody; and
- analysis of advisers’ annual reviews of the effectiveness of their compliance programs; an assessment of (1) whether the policies and procedures are implemented and enforced, and (2) and whether disclosures address fee-related conflicts, with a focus on conflicts that arise from account and product compensations structures.
In preparation for the compliance dates for the amendments to Regulation S-P, the Staff will engage firms during examinations about their progress in preparing incident response programs. After the applicable compliance dates, the Staff will examine whether firms have developed, implemented, and maintained policies and procedures in accordance with the rule’s new provisions that address administrative, technical, and physical safeguards for the protection of customer information.
As with previous years, the Staff will prioritize examinations of advisers that have never been examined, with particular emphasis on recently registered advisers.
The release also covered examination priorities with respect to broker-dealers, self-regulatory organizations, clearing agencies, and other market participants.
The Staff also noted risk areas which would impact various market participants, which include information security and operational resiliency, emerging financial technology, regulation systems compliance and integrity and anti-money laundering.
For more detailed information, the Staff’s 2026 examination priorities are available here, while the SEC’s press release on the Staff’s 2026 examination priorities is available here.