New priorities for 2026 — What investment advisers and broker-dealers can expect
11 min read
Late last year, the US Securities and Exchange Commission's ("SEC") Division of Examinations ("Examination Division") released its 2026 Examination Priorities Report (the "Priorities Report"), the first issued under new Chairman Paul S. Atkins.1 This annual publication outlines the Examination Division's key priorities and focus areas for registered investment advisers and broker-dealers ("registered entities") for the coming year.2 The SEC has also continued to bring enforcement actions against registered entities since Chairman Atkins was sworn in on April 21, 2025. Shortly after the Priorities Report was issued, the Examination Division also released a Risk Alert (the "Marketing Rule Alert") with respect to registered investment advisers' compliance with the Marketing Rule (Investment Advisers Act of 1940 Rule 206(4)-1), suggesting that marketing practices would also be a focus for examiners.3 Although the Priorities Report, Marketing Rule Alert and these enforcement actions do not offer a comprehensive roadmap of the SEC's priorities for the year ahead, they do provide valuable insights into what registered entities may anticipate.
The Priorities Report shows a continued focus on the SEC's past priorities, including fiduciary duties and compliance processes, as well as new priorities that reflect changing market conditions, technological realities and policy positions. The Examination Division also has noted that it will continue to prioritize examinations of new investment advisers who have never been examined and will focus on services provided to retail investors.
As noted, the Priorities Report is not intended to be exhaustive and there may be topics not covered that will still be examined. For example, while not discussed explicitly in this year's Priorities Report, last September, the SEC announced a new task force to combat cross-border fraud against US investors, with a particular focus on Chinese issuers and their registered entity gatekeepers.4
Investment Advisers: Conflicts and Compliance
The Examination Division continues to prioritize investment adviser adherence to fiduciary standards, emphasizing the duty of care and loyalty owed to clients—especially retail investors. While this year's Priorities Report does not include a section specifically devoted to advisers to private funds, the Priorities Report mentions a focus on alternative investments such as private credit and funds with extended lock-up periods, complex products such as option-based ETFs and high-cost investments. It is also particularly focused on the disclosure of fee-related conflicts that can arise from certain compensation structures relevant to private funds. Activist advisers should note the Priorities Report specifically mentions that examiners will focus on the timeliness and accuracy of beneficial ownership filings by such activists (such as Schedules 13D and 13G).
Failure to disclose material conflicts of interest, and the resulting breach of fiduciary duty, have continued to be a focus of SEC enforcement actions during Chairman Atkins' tenure.5 For example, the SEC settled charges in 2025 against a formerly registered investment adviser that breached its fiduciary duties by failing to disclose that its affiliated broker-dealer applied undisclosed fee markups, misleading clients into believing that an unaffiliated clearing broker determined various fees.6 In addition, the SEC charged the investment adviser with overbilling certain clients by imposing advisory fees on alternative investments when the clients' advisory agreements did not allow for such fees and with violating the books and records provisions because it had backdated annual compliance review documents, which were then provided to SEC examination staff.7
As in years past, the Examination Division is expected to continue to assess whether compliance programs include policies and procedures tailored to a registered entity's specific operations and whether they are effectively implemented and enforced. Investment advisers should be prepared for examinations this year that review annual compliance assessments, marketing practices, valuation methods, trading and custody arrangements.
Other enforcement actions have specifically highlighted these compliance failures.8 In one 2025 enforcement action, an investment adviser was charged with, among other things, violating the Compliance Rule (Advisers Act Rule 206(4)-7) for failing to implement compliance policies and procedures regarding record-keeping and its annual review of its compliance program.9
Investment Advisers: Marketing Rule Compliance
The Marketing Rule Alert flagged two primary areas in which the Examination Division perceived ongoing deficiencies: the use of testimonials and endorsements and third-party ratings provisions. In the first category, the Examination Division observed that advisers frequently failed to provide necessary disclosures at the time a testimonial or endorsement was circulated. These disclosure requirements include "clear and prominent disclosures" regarding the status of the person providing a testimonial or endorsement, whether or not such person was a current client or fund investor, whether or not that person received cash or non-cash compensation (including the nature of any such compensation), and whether that person had a material conflict of interest (such as an ownership interest in, or sub-advisory relationship with, the adviser). The Examination Division specifically decried the use of hyperlinks and/or smaller, lighter fonts when providing these necessary disclosures.
The Examination Division's second area of the Marketing Rule concerns involved investment advisers' use of third-party ratings, and the failure on the part of certain investment advisers using such ratings to diligence the reliability of third-party ratings reports, to clearly and prominently communicate the date of any such reports and to communicate whether the third-party ratings involved the payment of any cash or non-cash compensation. As with testimonials and endorsements, the Examination Division criticized the use of hyperlinks and/or smaller, lighter fonts when providing these necessary disclosures, as well as instances in which the disclosures did not immediately accompany the provided ratings.
Broker-Dealers: Retail Sales Practices and Regulation Best Interest
In its efforts to protect retail investors, the Examination Division will continue to scrutinize sales practices, product recommendations and compliance with Regulation Best Interest ("Reg BI").10 Particular attention will be given to product and strategy recommendations, conflict identification and mitigation, review of reasonably available alternatives and satisfaction of the duty of care that such fiduciaries have to their clients. Broker-dealers should expect examiners to focus on recommendations tied to complex and tax-advantaged products, including variable annuities, ETFs investing in illiquid assets, municipal securities, 529 Plans and private placements and structured products.
Recent enforcement actions further highlight the Examination Division's focus on Reg BI and a registered entity's compliance with the regulation.11 One such enforcement action charged a broker-dealer with violating the Reg BI Care Obligation (Securities Exchange Act of 1934 Rule 15l-1(a)(2)(ii)) for recommending certain high-risk bonds to retail customers close to retirement age.12 The broker-dealer was charged with failing to exercise reasonable diligence, care and skill to ensure that their recommendations were in the best interest of their clients, particularly given the illiquid and speculative nature of the investments.13 Additionally, the broker-dealer's written policies and procedures for Reg BI compliance were found to be insufficiently designed to achieve compliance because they lacked specific guidance for representatives and supervisors with respect to evaluating customer investment profiles.14
What All Registered Entities Should Expect: Operational Resiliency, Information Security, AI & AML
With the rise in cybersecurity threats and operational disruptions, the SEC is placing greater emphasis on the protection of investor information and business continuity. Examinations will focus on "governance practices, data loss prevention, access controls," incident response and recovery procedures and ransomware preparedness. The Examination Division will assess training and security controls addressing emerging artificial intelligence ("AI")-related risks and polymorphic malware, including the operationalization of threat intelligence.
In response to the 2024 amendments to Regulation S-P, which requires registered entities to have policies and procedures to prevent data breaches, the Examination Division has prioritized review of registered entities' progress in incident response preparation before compliance dates become effective. Examiners can be expected to review implementation of "administrative, technical, and physical safeguards" after effectiveness.15 To prepare registered entities, the SEC has held a series of compliance outreach events related to the implementation of amendments to Regulation S-P.16
Additionally, the Examination Division will continue to assess compliance with Regulation S-ID by reviewing whether registered entities have developed and implemented a written Identity Theft Prevention Program designed to eliminate identity theft. Registered entities should anticipate examinations focusing on whether the program is reasonably designed to uncover red flags as well as the nature and extent of training with respect to such programs.
The Priorities Report also notes that the SEC is closely monitoring the rise of AI, automated investment tools and trading algorithms. In recent remarks, Brian Daly, Director of the Division of Investment Management, stressed that AI is an area of growing importance for the Examination Division. Mr. Daly emphasized the importance of the use of AI in the investment management industry and the need for understanding the developing regulatory implications around its use.17 For entities that are broker-dealers, the recent FINRA Oversight Report similarly focuses heavily on trends and practices related to a firm's use of generative AI or similar technologies and stresses the need for all AI tools and other technology to comply with FINRA rules, noting that: "If a firm is relying on GenAI tools as part of its supervisory system, its policies and procedures may consider the integrity, reliability and accuracy of the AI model."18
The Examination Division also will continue to examine the extent to which registrants' Anti-Money Laundering ("AML") programs are tailored to the specific risks associated with a firm's business model, including reviews associated with foreign accounts and beneficial ownership. Registered entities should anticipate that the Examination Division will continue to review their monitoring and compliance with the US Department of the Treasury's Office of Foreign Assets Control sanctions regime.
While some of the priorities from recent years, such as off-channel communications and crypto assets, were notably not included in this year's Priorities Report, registered entities should still expect the SEC staff to ask about these matters during an examination.
Key Takeaways for 2026
Chairman Atkins has signaled that the Examinations Division will seek to approach examinations more collaboratively, stating in the Priorities Report announcement that examinations "should not be a 'gotcha' exercise" and instead "should enable firms to prepare to have a constructive dialogue with SEC examiners."19 Notwithstanding these statements, registered entities should prepare to be examined on these issues this year.
In particular, registered entities should proactively consider:
- Conducting gap analyses against the Examination Division's priorities, enhancing policies, procedures, documentation and training and engaging with legal and compliance advisors
- Ensuring implementation is completed to address Regulation S-P amendments and Regulation S-ID
- Reviewing and updating their conflict disclosures and evaluating product and investment program recommendations for suitability and consistency with client profiles
- Reviewing and updating their cybersecurity policies and ensuring that firm personnel are trained to identify and respond to threats
- Reviewing marketing practices and associated compliance programs and ensuring that such policies and practices comply with advisers' obligations to provide "clear and prominent" disclosures regarding the context and other considerations applicable to such testimonials, endorsements or third-party ratings (as required by the Marketing Rule)
- Assessing the adequacy of vendor management and third-party risk controls
In addition, registered entities using emerging technologies should ensure their representations are fair and accurate and they have effective supervision and controls in place. Registered entities should also audit technology-driven advisory and trading processes for compliance, monitor and supervise AI and algorithmic tools and update AML policies to reflect current risks. Broker-dealers, in particular, should review their sales practices, enhance documentation of product and account recommendations and ensure that disclosuresincluding Form CRSare accurate and complete.
While the Examination Division emphasizes that priorities may shift in response to emerging risks from new products and services or investor concerns, by taking these steps, registered entities can better position themselves to meet regulatory expectations, reduce risk and protect both their clients and their businesses in a changing regulatory landscape this year.
Ryan Sharpstene (White & Case, Associate, New York) contributed to the development of this publication.
1 Fiscal Year 2026 Examination Priorities, US Sec. & Exch. Comm'n Div. of Examinations (Nov. 17, 2025), available here.
2 While the Priorities Report addresses other types of entities, such as municipal advisors and transfer agents, this Client Alert focuses on investment advisers and broker-dealers.
3 Additional Observations Regarding Advisers' Compliance with the Advisers Act Marketing Rule, US Sec. & Exch. Comm'n Div. of Examinations (Dec 16, 2025), available here.
4 SEC targeting cross-border fraud, with a focus on Chinese companies & gatekeepers (Sep. 16, 2025), available here.
5 See, e.g., SEC Charges Former Investment Adviser for Failing to Adequately Disclose Conflicts of Interest, Overbilling, and Producing Compliance Documents Backdated by its CCO and President, available here.
6 Id.
7 Id.
8 See, e.g., SEC Charges Massachusetts-Based Investment Adviser with Marketing, Books and Records, and Compliance Rule Violations, available here.
9 Id.
10 For broker-dealers who are members of the Financial Industry Regulatory Authority, Inc. ("FINRA"), we note that FINRA has also highlighted the need for firms to comply with FINRA's communications and sales practices rules, including Reg BI in its 2026 Annual Regulatory Oversight Report ("FINRA Oversight Report"), available here.
11 US Sec. & Exch. Comm'n, Administrative Proceeding File No. 3-22507, available here; US Sec. & Exch. Comm'n, Administrative Proceeding File No. 3-22517, available here.
12 US Sec. & Exch. Comm'n, Administrative Proceeding File No. 3-22507, available here.
13 Id.
14 Id.
15 The compliance dates for the 2024 amendments to Regulation S-P are December 3, 2025, for larger entities and June 3, 2026, for smaller entities. See Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Customer Information (Jun. 3, 2024), available here.
16 The third and final of such outreach events was held by the SEC on Jan. 22, 2026. See Compliance Outreach on Regulation S-P, available here.
17 Remarks to the American Bar Association's Federal Regulation of Securities Committee's Private Funds Subcommittee and Investment Advisers and Investment Companies Subcommittee (Dec. 2, 2025), available here.
18 See FINRA Oversight Report.
19 SEC Division of Examinations Announces 2026 Priorities (Nov. 17, 2025), available here.
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