SEC Division of Examinations Releases its 2025 Examination Priorities

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 2025 examination priorities. The timing of the release aligns with the start of the SEC’s fiscal year to provide transparency and inform participants of the Staff’s focus areas in the upcoming fiscal year. In its release, the Staff indicated that exams will continue to focus on core areas such as review of compliance programs and governance practices, disclosures to investors, and an adviser’s adherence to its fiduciary duties, as well as newer areas of focus, including compliance with new rules, the use of emerging technologies, and the soundness of controls intended to protect investor information, records, and assets. 

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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. The Staff will continue its perennial focus on compliance programs, disclosures to investors, and governance practices. Focus areas may include review of specific topics or characteristics, with the Staff highlighting:

• fund fees and expenses, and any associated waivers and reimbursements;
• oversight of service providers (both affiliated and third-party);
• portfolio management practices and disclosures, for consistency with claims about investment strategies or approaches and with fund filings and marketing materials; and
• issues associated with market volatility.

The Staff indicated that it will continue to monitor developing areas of interest, such as funds with exposure to commercial real estate and compliance with new and amended rules.

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.

Registered Investment Advisors

As noted above, the Staff indicated that it will continue to review an adviser’s adherence to its fiduciary duties. In this respect, the Staff stated that it would prioritize reviewing:

• investment advice provided to clients with regard to products, investment strategies, and account types, with a focus on high-cost products, unconventional instruments, illiquid and difficult-to-value assets, and assets sensitive to higher interest rates or changing market conditions, including commercial real estate;
• dual registrants and advisers with affiliated broker-dealers; and
• the impact of an adviser’s financial conflicts of interest on providing impartial advice and best execution (recognizing that special consideration may be given for non-standard fee arrangements).

The Staff will continue to focus its examinations on an adviser’s compliance program, which might include a review of:

• the core components of the compliance program (such as marketing, valuation, trading, portfolio management, disclosure and filings, and custody);
• adviser annual reviews on effectiveness of compliance programs;
• fiduciary obligations of advisers that outsource investment selection and management;
• alternative sources of revenue or benefits advisers receive, such as selling non-securities based products to clients; and
• the appropriateness and accuracy of fee calculations and the disclosure of fee-related conflicts, such as those associated with select clients negotiating lower fees when similar services are provided to other clients at a higher fee rate.

The Staff noted that the focus or depth of a review of an adviser’s compliance program depends on the adviser’s practices or products. For instance, the Staff suggested that there may be a more in-depth review of policies and disclosures relating to use of artificial intelligence (AI) for advisers integrating AI into their advisory operations, and a more in-depth review of supervision and oversight practices for advisers who utilize a large number of independent contractors working from geographically dispersed locations.

The Staff will continue to prioritize examinations of advisers that have never been examined and those that have not been examined in a number of years.

Private Fund Advisers

The Staff noted that private fund advisers remain a significant portion of the SEC-registered adviser population, and that examinations will focus on topics such as:

• whether disclosures are consistent with actual practices, if an adviser met its fiduciary obligations in times of market volatility, and whether a private fund is exposed to interest rate fluctuations, noting that examinations may focus in particular on advisers to private funds that are experiencing poor performance and significant withdrawals or hold more leverage or difficult-to-value assets;
• the accuracy of calculations and allocations of private fund fees and expenses (including the valuation of illiquid assets, calculation of post commitment period management fees, offsetting of such fees and expenses, and the adequacy of disclosures);
• disclosure of conflicts of interests and risks, and adequacy of policies and procedures (including those relating to investment practices, investments held by multiple funds and the use of affiliated service providers); and
• compliance with recently adopted SEC rules, including amendments to Form PF and the Marketing Rule.

The release also covered examination priorities with respect to broker-dealers, self-regulatory organizations, clearing agencies, and other market participants.

For more detailed information, the Staff’s 2025 examination priorities are available here, and the SEC’s press release on the Staff’s 2025 examination priorities is available here.