November 24, 2025
Heightened Focus on Fiduciary Compliance, Retail Investor Protection, Investment Advisers, and Emerging Technology
On Nov. 17, 2025, the SEC’s Division of Examinations released its Fiscal Year 2026 Examination Priorities. The Division of Examinations (Division) begins by stating that it has reassessed how best to deploy its resources to meet both growing responsibilities and evolving risks shaped by developments in the U.S. capital markets and broader economic and geopolitical forces. The Division further adds, this involves reevaluating our risk-based priorities and how we approach various trends in the markets, new and emerging products and services, and our processes to ensure our examinations continue to be efficient and effective. Division staff carry out their responsibilities with focus and efficiency, ensuring that our risk-based examinations remain effective and responsive to the needs of investors and the marketplace.
The Division is continuously assessing risks and discussing with its colleagues around the SEC how it can best support the SEC’s mission and priorities. Further, the Division’s priorities may shift in response to new or emerging risks, products and services, market events or investor concerns.
The Division is also zeroing in on cross-market risks—cybersecurity, operational resiliency, governance, vendor oversight, access controls, identity-theft prevention (Regulation S-ID), and compliance with updated Regulation S-P data-protection and notification rules. It is heightening scrutiny of emerging financial technologies, including automated tools, artificial intelligence (AI)-driven recommendations, and algorithmic trading, with a focus on data governance, bias mitigation, supervision, model oversight, and AI-related cyber, fraud, and model-risk vulnerabilities.
Notably, the Division does not reference cryptocurrency, signaling a departure from its FY 2024 and FY 2025 priorities.
The FY 2026 priorities are discussed below.
Investment Advisers
Examining investment advisers’ (adviser) adherence to their duty of care and duty of loyalty obligations remains a priority for the Division, particularly regarding aspects of the advisers’ business that serve retail investors. The Division identifies higher-risk categories of advisers: (1) advisers that are dually registered as broker-dealers, particularly where such advisers have representatives who are also dually licensed as registered representatives and receive compensation or other financial incentives that may create conflicts of interest that must be addressed (e.g., account recommendations and allocations); (2) advisers utilizing third-parties to access clients’ accounts, where controls may be insufficient to protect client assets and data; and (3) advisers that have merged or consolidated with, or been acquired by, existing advisory practices, which may result in accompanying operational and/or compliance complexities or new conflicts of interest; and (3) never-examined advisers, with particular interest on registered investment advisers.
Examiners will assess the effectiveness of Advisers’ Compliance Programs. These examinations typically include an evaluation of the adviser’s marketing, valuation, trading practices, expense disclosures and filings, custody, and private fund governance.
Investment Companies
The Division continues to prioritize examinations of registered investment companies (RICs or funds), including mutual funds and exchange-traded funds (ETFs) due to their importance to retail investors, particularly those saving for retirement.
Examinations will generally include compliance programs, disclosures, filings and governance practices with a particular focus on:
- Fund fees and expenses;
- Portfolio management practices and disclosures; and
- Compliance with the amended fund “Names Rule” following the compliance date.
The Division will also prioritize never-before-examined RICs for examination.
Broker-Dealer Trading-Related Practices and Services
Broker-dealer equity and fixed income trading practices remain a Division priority. Areas of review will include extended hours trading and municipal securities, including the rates reset process on variable rate demand obligations, priority of orders, and mark-ups disclosure. The Division will also review broker-dealers’ routing and execution of orders. With respect to Regulation SHO, the Division will review whether broker-dealers are appropriately relying on the bona fide market making exemption. The Division will also examine broker-dealer sales practices and continue to prioritize retail investor protections under Regulation Best Interest (Reg BI).
Examinations will also focus on products that are complex or tax advantaged, such as variable and registered index-linked annuities; ETFs that invest in illiquid assets such as private equity or private credit; municipal securities, including 529 Plans; private placements; structured products; alternative investments; and other products that have complex fee structures or return calculations, are based on exotic benchmarks, are illiquid, or represent a growth area for retail investment.
Self-Regulatory Organizations
The Division will assess the effectiveness of regulatory and enforcement programs at national securities exchanges, such as Financial Industry Regulatory Authority (FINRA), and the Municipal Securities Rulemaking Board (MSRB).
For clearing agencies, examiners will focus on risk management frameworks, liquidity and collateral practices, recovery and wind-down planning, and remediation of prior findings.
Security-based swap dealers and execution facilities should expect targeted reviews of transaction reporting, margin and capital requirements, and operational-risk controls.
CLEARING AGENTS
These examinations will focus on clearing agencies’ core risks, processes, and controls and will cover the specific areas required by statute, including the nature of clearing agencies’ operations and assessment of financial and operational risk.
The Division will conduct risk-based examinations of registered clearing agencies that have not been designated by statute as systemically important. The Division will examine for compliance with the SEC’s Standards for Covered Clearing Agencies, which are rules requiring policies and procedures that address core risk-management functions, including maintaining sufficient financial resources, protecting against credit risks, managing member defaults, and mitigating operational risk.
TRANSFER AGENTS
The Division will continue to examine transfer agent processing of items and transfers, recordkeeping and record retention, safeguarding of funds and securities, and filings with the SEC. Examinations will also focus on transfer agents that use emerging technology to perform their transfer agent functions.
FUNDING PORTALS
The Division will focus on funding portal arrangements with qualified third-parties regarding the maintenance and transmission of investor funds and examine whether funding portals are making and preserving required records.
SECURITY-BASED SWAP DEALERS (SBSDs)
The Division will continue to focus its examinations on whether SBSDs are complying with their obligations under Regulation SBSR to accurately report security-based swap transactions to security-based swap data repositories. The Division also expects to focus on SBSDs’ risk management practices and compliance with capital, margin and segregation requirements.
SECURITY-BASED SWAP EXECUTION FACILITIES (SBSEFs)
The Division expects to begin conducting examinations of registered SBSEFs focusing on the SBSEF’s rules and related internal policies and procedures addressing trade monitoring, trade processing, and participation. Moreover, the Division plans to assess how SBSEFs establish programs of risk analysis and oversight to identify and minimize sources of operational risk.
Additional Areas Impacting Market Participants
Cybersecurity practices by registrants remains vital to help ensure the safeguarding of customer records and information. Particular attention will be placed on policies and procedures pertaining to governance practices, data loss prevention, access controls, account management, and responses and recovery to cyber-related incidents, including those related to ransomware attacks. In addition, focus will be on training and security controls that firms are employing to identify and mitigate new risks associated with AI and polymorphic malware attacks, including how they are operationalizing information from threat intelligence sources.
The Division will assess compliance with Regulations S-ID and S-P, as applicable. Examinations will focus on firms’ policies and procedures, internal controls, oversight of third-party vendors, and governance practices. Regarding Regulation S-ID, the Division will focus on firms’ development and implementation of a written identity theft prevention (ITP) program that is designed to detect, prevent, and mitigate identity theft in connection with covered accounts. Specifically, the Division will assess the reasonableness of firms’ policies and procedures included within their ITP programs, including whether they are reasonably designed to identify and detect red flags, particularly during customer account takeovers and fraudulent transfers, and include firm training on identity theft prevention.
The Division remains focused on emerging financial technology, i.e., registrants’ use of certain products and services, such as automated investment tools, AI technologies, and trading algorithms or platforms, and the risks associated with the use of emerging technologies and alternative sources of data. As such, the Division will examine firms that engage in activities such as automated investment advisory services, recommendations, and related tools and methods.
Regulation Systems Compliance and Integrity (SCI) will focus on policies and procedures related to incident response and how SCI entities review the effectiveness of these policies and procedures and SCI entities’ management of third-party vendor risk and properly identifying vendor systems that qualify as SCI systems or indirect SCI systems.
Anti-Money Laundering (AML) remains a Division priority. The Bank Secrecy Act (BSA) requires certain financial institutions, including broker-dealers and certain RICs, to establish AML programs. AML programs should be reasonably designed to prevent these financial institutions from being used for money laundering or the financing of terrorist activities and to achieve and monitor compliance with applicable BSA requirements.
Lastly, the Division will review whether broker-dealers, advisers, and RICs are monitoring the Department of Treasury’s Office of Foreign Assets Control sanctions and ensuring compliance with such sanctions.
Whistleblowers Play a Critical Role
Whistleblowers play a critical role in ensuring the integrity of the U.S. and global financial markets. Both the SEC and CFTC rely on whistleblowers to help them enforce violations of the federal securities laws and the Commodity Exchange Act. If you have witnessed fraud, or noncompliance with the examination priorities listed above, consider blowing the whistle.
What to Do if You Have Witnessed Fraud or Noncompliance:
- Speak with an Experienced Whistleblower Attorney: Contact an experienced whistleblower attorney who understands the SEC and CFTC whistleblower programs. These consultations at Cohen Milstein are confidential and free of charge. Counsel can guide you through the process and assist in preparing and submitting your Tip, Complaint, and Referral (Form TCR) to the SEC or CFTC.
- Gather Your Information: Along with your personal observations and a completed Form TCR, the SEC and CFTC requires supporting information that is original and not in the public sphere.
- Understand the Potential for a Whistleblower Award: If your information leads to a successful SEC or CFTC enforcement action resulting in more than $1 million in monetary sanctions, you may receive an award ranging from 10-30% of any amount collected.
The SEC’s Whistleblower Program and the CFTC’s Whistleblower Program provide comprehensive guidelines on reporting fraud and the whistleblower process. Access the Tip, Complaint or Referral (TCR) forms: SEC Form TCR and the CFTC Form TCR.
About the Author
Christina McGlosson, special counsel in Cohen Milstein’s Whistleblower practice, focuses exclusively on Dodd-Frank Whistleblower representation. She is the former director of the Whistleblower Office in the Division of Enforcement at the U.S. Commodity Futures Trading Commission. She was a senior attorney in the SEC’s Division of Enforcement, where she assisted in drafting the SEC rules to implement the whistleblower provisions of Dodd-Frank and served as Senior Counsel to the Director of the SEC’s Division of Enforcement and to its Chief Economist.
Christina represents whistleblowers in the presentation and prosecution of fraud claims before the SEC, CFTC, FinCEN, as part of the U.S. Treasury, the Department of Justice, and other government agencies.