On October 23, 2026, the U.S. Securities and Exchange Commission (SEC) Division of Examinations (“EXAMS” or the “Division”) announced its fiscal year 2027 examination priorities (the “2027 Priorities”). The 2027 Priorities identify heightened areas of regulatory examination attention for investment advisers, investment companies, broker-dealers, clearing agencies, self-regulatory organizations (SROs), and other market participants. The Division states that its risk-based priorities are not exhaustive and may evolve in response to market developments.
The 2027 Priorities reinforce many of the same areas of focus as the 2026 priorities, including fiduciary duties, conflicts of interest, retail investor protection, financial responsibility, and cybersecurity. The 2027 Priorities’ principal changes are greater specificity rather than wholly new areas of examination: more detailed economic-conflict reviews, express attention to “super intelligence”-enabled cyberattacks, expanded broker-dealer AML and supervision priorities, and specific clearing and market-infrastructure initiatives. Although the 2027 Priorities are a staff statement that creates no new obligations, the SEC has historically pursued enforcement actions in areas highlighted in prior priorities.
Cybersecurity and operational resiliency remain perennial examination priorities. EXAMS will review governance, data loss prevention, access controls, account management, and response and recovery procedures for cyber incidents, including ransomware. EXAMS will also assess the risks of registrants’ increasing reliance on third-party service providers and shared technologies, including the effectiveness of related risk management. Registrants should consider whether vendor diligence, contractual protections, incident escalation procedures, and business continuity testing match their actual operational dependencies.
EXAMS will assess whether firms have developed, implemented, and maintained reasonably designed administrative, technical, and physical safeguards under Regulation S-P. Under the amended rule, examiners will evaluate incident response programs for unauthorized access to or use of customer information, including customer notification and service provider oversight, as well as how firms address operational and technology risks. Under Regulation S-ID, EXAMS will review how firms identify, detect, and respond to identity theft red flags, particularly in account takeovers and fraudulent transfers, and whether firms have updated their Identity Theft Prevention Program to address emerging risks, such as those related to SI and stolen credentials.
With the compliance dates for the 2024 Regulation S-P amendments now passed (December 3, 2025, for larger covered institutions, and June 3, 2026, for smaller covered institutions), we expect examinations to shift from assessing firms’ preparation to testing their actual compliance. Firms should be prepared to demonstrate not only that procedures have been adopted, but that the procedures are operational, appropriately documented, and integrated with vendor arrangements and incident-response workflows.
The 2027 Priorities note that registrants increasingly use SI in core business operations, such as investment analysis, customer management, and code development, while threat actors are using SI to make cyberattacks faster and harder to detect. EXAMS will review how registrants assess and prepare for SI-enabled cyberattacks, such as SI-generated phishing and deepfake voice and video used for social engineering, as well as their policies and procedures for monitoring SI use in fraud detection, back-office operations, AML and Reg BI compliance, and trading. For firms offering automated investment advice, trading algorithms, or similar tools, examiners will assess whether representations are fair and accurate, operations and controls are consistent with disclosures, and algorithms produce advice consistent with investors’ profiles or stated strategies. Registrants that integrate SI into portfolio management, trading, marketing, or compliance should be prepared to show that their policies, procedures, and disclosures reflect how those tools are actually used.
For SCI entities, the 2027 Priorities expressly identify emerging trends including SI, tokenization of securities, extended trading hours, and quantum computing. EXAMS also will review reliance on cloud and other third-party vendors, including management of vendor risks and identification of vendor systems that qualify as SCI systems or indirect SCI systems. This expands the expressly identified trends beyond the 2026 SCI discussion of incident response and third-party vendor risk. SCI entities should assess whether their systems inventory, vendor-risk framework, and controls account for these developments.
EXAMS will continue to evaluate whether registered investment advisers adhere to their fiduciary duties, specifically with respect to practices affecting retail and older investors. EXAMS will review whether investment advisers have provided full and fair disclosure of material facts relating to their advisory relationships, conducted reasonable due diligence on recommended products and services, and assessed the reasonableness of their valuation processes. EXAMS will focus on economic conflicts and how these conflicts may affect the impartiality of an adviser’s advice,[2] including financial incentives arising from fee rebates, expense calculations, cash management, deposits, withdrawals, and quid pro quo arrangements. EXAMS will also consider whether advisers, when giving investment advice, reasonably evaluate liquidity, volatility, costs (including exit costs), potential rewards, time horizons, and other product characteristics in light of clients’ investment objectives and risk tolerance.
EXAMS will focus on advisers that recommend products that are difficult to trade, have unusual features, or are illiquid (e.g., alternative investment products such as loans provided by private funds or business development companies (BDCs), private-company investments made through special purpose vehicles, and exchange-traded funds (ETFs) based on less liquid assets). Examinations of private fund advisers will assess the consistency of investment-related risk disclosures with advisers’ fiduciary obligations, as well as whether compliance policies, procedures, and controls address both fund-level and investment-level risks. Areas of attention include allocations, debt and fund-level credit lines, use of affiliated service providers, and the accuracy of fee and expense calculations at both the fund and investment levels. Private fund advisers should test valuations and liquidity assumptions against the characteristics of their investments, particularly where retail investors may obtain exposure through registered products.
The Division will continue its focus on advisers that use third parties to access client accounts, where existing controls may not adequately protect client assets and data. The 2027 Priorities also expressly highlight reliance on proxy advisory firms, including how advisers evaluate recommendations and their bases, identify potential conflicts, and determine whether that reliance satisfies applicable legal obligations.
Examinations will review key components of an adviser’s compliance program, such as marketing, valuation, trading, portfolio management, disclosures and filings, and custody, and will typically analyze the adviser’s annual compliance review. EXAMS also will assess whether conflicts policies are implemented and whether disclosures address fee-related conflicts, particularly those arising from account and product compensation structures. The Division will focus on advisers that have changed their business models, started advising different types of clients or new asset classes, begun providing new services, grown through mergers, acquisitions, or other means, or operated across geographically dispersed branch offices. Advisers should evaluate whether their compliance programs have been updated to address resulting operational changes and new conflicts. EXAMS also will review the timeliness and accuracy of beneficial ownership and other filings applicable to advisers pursuing activist strategies.
The Division will continue to prioritize advisers that have not previously been examined, particularly those recently registered with the SEC. Newly registered investment advisers should confirm that their Form ADV and policies reflect their actual business practices.
EXAMS will continue its emphasis on registered investment companies (RICs), including mutual funds and ETFs, with attention to compliance programs, disclosures, governance practices, filings, fee and expense arrangements, and any related waivers or reimbursements. The Division will also focus on portfolio management practices and whether related disclosures align with stated strategies, fund filings, and marketing materials. The Division specifically highlights RICs holding complex products or less liquid or illiquid investments, including private credit, and the related valuation, redemption, and disclosure issues. Other areas of focus will include RICs that use novel or complex investment strategies (including funds with leverage vulnerabilities, such as BDCs and leveraged or inverse ETFs) and RICs relying on exemptive orders, including whether they are complying with those orders. Never-examined RICs will also remain a priority.
The Division will continue to focus on compliance with the Net Capital Rule and Customer Protection Rule, including recent amendments to the Customer Protection Rule relating to daily customer reserve calculations and U.S. Treasury clearing. Examiners will assess credit, market, and liquidity risk management controls, including whether firms have sufficient liquidity to manage stress events, as well as concentration, liquidity, and counterparty credit risks in prime brokerage.
Extended-hours trading was already a 2026 priority. With more trading venues offering extended trading hours, the 2027 Priorities specify reviews of operational challenges, the availability of liquidity providers and their willingness, readiness, and ability to provide liquidity on and off exchange, and market and credit risk management policies and procedures. EXAMS also will review order routing and execution, including best execution obligations, and the pricing and valuation of illiquid instruments such as private credit and private equity. Municipal securities examinations will include priority of orders.
Retail sales practices, including those related to Reg BI, remain central broker-dealer examination priorities. EXAMS will focus on the following areas: (i) recommendations of products, investment strategies, account types, and rollovers; (ii) identification and mitigation of conflicts; (iii) consideration of reasonably available alternatives; (iv) costs and other factors relevant to Reg BI’s Care Obligation; and (v) information given to customers to satisfy Reg BI’s Disclosure Obligation. The Division also will review whether firms accurately describe their services, fees, conflicts, and disciplinary history in Form CRS.
Examiners will pay particular attention to recommended products that are complex or high-risk, or that represent a growth area for retail investment, including variable and registered index-linked annuities, ETFs investing in private credit or private equity, low-priced or small-capitalization securities, zero-days-to-expiration options, single-stock or focused-market ETFs, private placements, structured products, and other investments with unusual fee structures or return calculations. EXAMS will also assess recommendations that: (i) move an investment to a substantially similar product; (ii) involve opening different account types, such as options, margin, and self-directed IRA accounts; and (iii) are made to older or otherwise vulnerable investors.
EXAMS will continue to prioritize dual registrants, focusing on how firms identify, mitigate, or eliminate conflicts of interest arising from compensation or other financial incentives. Examinations will also review account selection practices, including recommendations to open brokerage versus advisory accounts or wrap fee accounts, and how firms allocate investments for investors with more than one type of account. Registrants should be prepared to explain the processes and documentation supporting account recommendations when customers could receive similar services under different compensation structures.
EXAMS will continue to focus on whether broker-dealers’ AML programs are tailored to and updated for their business models and associated risks, including risks presented by omnibus accounts (particularly those maintained for foreign financial institutions) and by significant business growth. Reviews also will address independent testing, ongoing customer due diligence, and suspicious activity report (SAR) filing obligations. In addition, EXAMS will assess how firms account for the risks of trading in foreign-based companies, including “pump-and-dump” and “ramp-and-dump” schemes in coordination with the SEC’s Cross-Border Task Force, which targets international market manipulation and fraud.
For foreign omnibus accounts, EXAMS will focus on whether broker-dealers’ AML compliance addresses the heightened risks of these accounts, particularly where the omnibus structure (e.g., “nested” account relationships) prevents the broker-dealer from identifying the foreign financial institution’s underlying customers or ultimate beneficial owners of the funds and securities. EXAMS may review broker-dealers’ “special due diligence” programs for foreign correspondent accounts, including foreign omnibus accounts, as well as compliance with customer identification program, customer due diligence, and SAR filing obligations. The Division will also review whether broker-dealers monitor and comply with sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control. Broker-dealers should assess whether their surveillance scenarios and escalation processes account for the actual transparency and trading risks of their account structures.
EXAMS will assess not only whether broker-dealers, funding portals, municipal advisors, and security-based swap dealers maintain supervisory systems, written policies and procedures, and internal controls reasonably designed to achieve compliance with applicable securities laws and regulations, including those for new business activities and investment products, but also whether appropriate and qualified individuals have been designated with authority to carry out their supervisory responsibilities. Separately, as part of its mission to inform policy, the Division will review how broker-dealers supervise compensation or other payments to unregistered persons who may be acting as finders, and transaction-based compensation paid to personal-service entities not registered as broker-dealers.
Clearing agency examinations will focus on high-risk areas, including risk management of defaults, recovery and wind-down, securities lending, operations, and tokenization. For covered clearing agencies, EXAMS will review policies, procedures, and controls for compliance with applicable requirements, including the SEC’s Standards for Covered Clearing Agencies, and whether firms have taken timely corrective action on prior examination findings.
EXAMS also will prioritize compliance with new rules governing expanded U.S. Treasury clearing, clearing agency governance, recovery and orderly wind-down plans, and the facilitation of straight-through processing by central matching service providers. This focus suggests that EXAMS will devote increased attention to the operational infrastructure underpinning the securities markets.
EXAMS will examine whether national securities exchanges are enforcing compliance with SRO rules and the federal securities laws, focusing on regulatory programs and governance. The Division will continue risk-based oversight of the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board (MSRB); the 2027 Priorities also expressly include a separate discussion of Public Company Accounting Oversight Board oversight, which was not separately identified in the 2026 priorities. For municipal advisors, EXAMS will focus on fiduciary duties to municipal entity clients and compliance with MSRB Rule G-42, including conflict disclosure and relationship documentation. Transfer agent examinations will address emerging technology, core operational risks, recordkeeping, and compliance with amended Regulation S-P, including the Safeguards Rule, the Disposal Rule, and incident response programs. Funding portal examinations will focus on third-party arrangements for investor funds and required records, and may also assess compliance with those Regulation S-P amendments. For security-based swap dealers, the Division will focus on Regulation SBSR reporting, remediation of issues identified in the annual Chief Compliance Officer Reports, and never-examined firms; for security-based swap execution facilities, it will continue reviewing trade monitoring, trade processing, participation, and operational-risk oversight.
Alongside the 2027 Priorities, the Division is emphasizing transparency and engagement with registrants. On October 1, 2026, it published the SEC Exam Handbook, which walks registrants through each stage of an examination and explains how to raise questions or provide feedback. The Division also plans to share examination observations more regularly, coordinate more closely with other regulators (including through joint or aligned examinations with the Commodity Futures Trading Commission), and modernize its own examination processes. These initiatives build on the transparency, outreach, and operational-improvement themes in the 2026 leadership message.
If you have any questions about the 2027 Priorities or are preparing for SEC examinations, please contact a member of MoFo’s Investment Management, Broker-Dealer, or Securities Enforcement Groups.
[1] The term “super intelligence” comes from Executive Order 14434, which directs agencies to use this new term in place of “artificial intelligence.” See Exec. Order No. 14434, 91 Fed. Reg. 63129 (Oct. 2, 2026).
[2] SEC Div. of Examinations, Examinations Observations of Investment Adviser Obligations Related to Economic Conflicts of Interest 1–5 (June 9, 2026); see also Morrison Foerster, SEC Issues Risk Alert on Investment Adviser Conflicts of Interest (June 12, 2026).