The Securities and Exchange Commission (SEC) Division of Examinations has announced its fiscal year 2027 priorities, reaffirming a risk-based approach focused on investor protection, compliance with the federal securities laws, and market integrity. The priorities highlight four core objectives: promote compliance, prevent fraud, monitor risk, and inform SEC policy.
The priorities identify key areas of risk that the staff expects to assess across registrant types in 2027:
- Fiduciary duty and standards of conduct. Examiners will review full and fair disclosure, due diligence on recommended products, the effectiveness of policies and procedures, and valuation processes, with particular attention to retail and older investors.
Staff will also focus on economic conflicts of interest, such as whether an adviser’s financial interests may affect the impartiality of its advice, including conflicts related to fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, and deposits and withdrawals.
- Private funds, private credit, and illiquid products. Examiners will pay particular attention to products that are difficult to trade, have unusual features, or are illiquid. These include loans provided by private funds or business development companies (BDCs), special purpose vehicles investing in private companies, exchange-traded funds (ETFs) investing in less liquid assets, option-based funds, inverse and single-stock ETFs, and zero-days-to-expiration options.
- Technology and innovation. As registrants increasingly integrate super intelligence (SI) into their businesses, examiners will assess compliance with existing, technology-neutral obligations. They will also examine firms’ preparedness for SI-related risks, including cybersecurity threats such as SI-generated phishing and deepfake voice and video used for social engineering.
Staff will examine policies and procedures governing the use and monitoring of SI in fraud prevention and detection, back-office operations, compliance with anti-money laundering (AML) and Regulation Best Interest (Reg BI) obligations, and trading.
- Cybersecurity and third-party risk. Examiners will review firms’ cybersecurity governance, data loss prevention measures, and incident response protocols. They will also assess risk management practices related to the increased use of third-party service providers and shared technologies.
Examiners will assess compliance with amended Regulation S-P, including policies and procedures designed to protect customer information and incident response programs addressing unauthorized access to or use of that information.
Staff will also review policies and procedures under Regulation S-ID, focusing on firms’ efforts to mitigate identity theft risks and update their Identity Theft Prevention Programs.
Taken together, the 2027 priorities signal where examiners expect firms to strengthen core controls, including compliance programs, disclosures, supervision, cybersecurity, and oversight of SI. They emphasize risks to retail and older investors, as well as risks associated with complex, higher-risk, or illiquid products. The priorities also highlight the examination program’s role in informing SEC policy through observations of evolving market practices.
Investment Advisers: Fiduciary Duty, Conflicts, and Alternatives
Examinations will assess whether advisers’ recommendations align with clients’ objectives, risk tolerance, liquidity needs, and time horizons, with special attention to advice provided to older investors and those saving for retirement.
Staff will evaluate how advisers identify, mitigate, and disclose conflicts of interest, including those arising from fees and expenses, allocation decisions across vehicles and accounts, cross-fund transactions, vertical integration, and side-by-side management of private funds and retail products.
Private Funds and Private Credit
Private credit and illiquid products are a key priority because evolving strategies in these markets may present new risks. Staff has identified products that are difficult to trade, have unusual features, or are illiquid, including loans provided by private funds or BDCs, investments in private companies through special purpose vehicles, and other complex or higher-risk investments.
Managers should expect examiners to focus on valuation methodologies and inputs for illiquid assets, liquidity and redemption management, and whether disclosures are consistent with actual practices.
Registered Funds and Retail Investors
Registered investment companies (RICs), including mutual funds and ETFs, remain a priority given their significance to retail and older investors.
Examinations will focus on fund fees and expenses, including waivers and reimbursements, as well as portfolio management practices and whether disclosures align with stated strategies, filings, and marketing materials.
Staff will continue to prioritize never-before-examined RICs and monitor developing areas of interest. These include complex products; less liquid or illiquid investments, such as private credit; funds with leverage vulnerabilities, including many BDCs and leveraged or inverse ETFs; and funds operating under exemptive orders.
Broker-Dealers: Regulation Best Interest, Form CRS, and Complex Products
For broker-dealers, the 2027 priorities emphasize retail sales practices, including compliance with Reg BI. Examiners will focus on recommendations involving products, investment strategies, and account types, including rollover recommendations.
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 or small-cap securities, zero-days-to-expiration options, single-stock ETFs, private placements, structured products, and alternative investments.
Staff will also review the content of broker-dealers’ relationship summaries (Form CRS) and examine trading practices, including extended-hours operations, best execution, and the valuation of illiquid instruments.
Examiners will review AML programs and assess whether appropriate supervisory systems and qualified supervisors are in place.
Cybersecurity, Data Privacy, and Emerging Technology
Information security, particularly cybersecurity, will remain a focus. Examinations will review governance practices, data loss prevention measures, access controls, account management, and response and recovery protocols for cyber incidents, including ransomware attacks.
Staff will also assess the risks associated with firms’ increasing use of third-party service providers and shared technologies.
Examiners will assess compliance with amended Regulation S-P, including administrative, technical, and physical safeguards for customer information. They will also evaluate incident response programs addressing unauthorized access to or use of customer information, including customer notification procedures and service provider oversight.
Under Regulation S-ID, examiners will focus on processes for identifying, detecting, and responding to identity theft red flags, particularly those involving customer account takeovers and fraudulent transfers. They will also assess whether firms are updating their Identity Theft Prevention Programs to address risks associated with SI and stolen credentials.
Program Focus and Scope
Consistent with prior years, staff will prioritize newly registered and never-before-examined advisers and funds. The examination program aims to maintain a consistent approach to promoting compliance.
These examinations will evaluate advisers’ compliance with regulatory requirements and their processes for identifying, addressing, and disclosing risks and conflicts of interest. Examiners will also assess whether advisers are fulfilling their fiduciary duties to clients.
The published priorities are not exhaustive. Staff will continue to devote resources to other areas and assess risks on an ongoing basis. Examination priorities and areas of focus may shift in response to new or emerging risks, products and services, market events, or investor concerns.
Preparing for a 2027 Examination
The fiscal year 2027 examination priorities reflect continuity in the SEC’s focus on fiduciary duty, conflicts, and compliance program effectiveness, while sharpening attention to economic conflicts, private credit and other illiquid products, firms undergoing change, and the rapid adoption of SI.
While the priorities do not create new obligations, they offer a practical roadmap for where examiners will spend their time. Investment advisers and funds should use this guidance, along with the new SEC Exam Handbook and recent risk alerts, to conduct targeted pre-examination reviews, refresh disclosures and policies in identified areas, and ensure their annual compliance reviews document how the firm has addressed these risks.
Alston & Bird’s Investment Funds Group is available to assist clients in assessing their examination readiness and addressing issues raised by the SEC’s new examination priorities.
If you have any questions, or would like additional information, please contact one of the attorneys on our Investment Funds team.
You can subscribe to future advisories and other Alston & Bird publications by completing our publications subscription form.