On October 21, the SEC Division of Examinations released their 2025 Exam Priorities.
“Our 2025 examination priorities identify the key areas of potentially increased risks and related harm for investors,” said Keith Cassidy, Acting Director of the Division of Examinations. “We hope that registrants will evaluate their compliance programs in the areas we identified and make the changes necessary to protect investors and maintain fair and orderly capital markets.”
In this blog, we’ll highlight some of the key takeaways per firm type as well as industry-wide focus areas recognized by the Division.
2025 SEC Exam Priorities by Firm Type
Within this year’s release, the SEC highlighted several specific priorities for Investment Advisers, Investment Companies, and Broker-Dealers.
Investment Advisers
- Adherence to Fiduciary Standards of Conduct
- the Division will focus on recommendations related to: (1) high-cost products; (2) unconventional instruments; (3) illiquid and difficult-to-value assets; and (4) assets sensitive to higher interest rates or changing market conditions, including commercial real estate.
- Dual registrants and advisers with affiliated broker-dealers. Common areas of focus include: (1) assessing investment advice and recommendations regarding certain products to determine whether they are suitable for clients’ advisory accounts; (2) reviewing disclosures to clients regarding the capacity in which recommendations are made; (3) reviewing the appropriateness of account selection practices (e.g., brokerage versus advisory)…
- Effectiveness of Advisers’ Compliance Programs
- the Division continues to focus on whether the policies and procedures address compliance with the Advisers Act and the rules thereunder and are reasonably designed to prevent the advisers from placing their interests ahead of clients’ interests. Areas on which examinations may focus include: (1) fiduciary obligations of advisers that outsource investment selection and management; (2) alternative sources of revenue or benefits advisers receive, such as selling non-securities based products to clients; and (3) 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.
- Examinations of Advisers to Private Funds
- Whether disclosures are consistent with actual practices and if an adviser met its fiduciary obligations in times of market volatility and whether a private fund is exposed to interest rate fluctuations.
- Compliance with recently adopted SEC rules, including amendments to Form PF, and the updated rules that govern investment adviser marketing, to assess whether advisers have established adequate policies and procedures and whether their actual practices conform to them.
- Never Examined Advisers, Recently Registered Advisers, and Advisers Not Recently Examined
Investment Companies
- Examinations will include “Mutual funds and exchange-traded funds, due to their importance to retail investors, particularly those saving for retirement.”
- Particular examination focus areas may include review of specific topics or characteristics involving: (1) fund fees and expenses, and any associated waivers and reimbursements; (2) oversight of service providers (both affiliated and third-party); (3) portfolio management practices and disclosures, for consistency with claims about investment strategies or approaches and with fund filings and marketing materials; and (4) issues associated with market volatility.
Broker-Dealers
- Regulation Best Interest
- (1) recommendations with regard to products, investment strategies, and account types and whether the broker has a reasonable basis to believe the recommendation is in the best interest of the customer and does not place the broker’s interests ahead of the customer’s interests; (2) disclosures made to investors regarding conflicts of interest; (3) conflict identification and mitigation and elimination practices; (4) processes for reviewing reasonably available alternatives; and (5) factors considered in light of the investor’s investment profile such as investment goals and account characteristics.
- encompass reviews of firms’ process for identifying and mitigating and eliminating conflicts of interest, account allocation practices (e.g., allocation of investments where an investor has more than one type of account) and account selection practices (e.g., brokerage versus advisory, including when rolling over to an IRA or transferring an existing brokerage account to an advisory account, as well as advice to open wrap fee accounts). Examinations may also assess broker-dealer supervision of sales practices at branch office locations
- Form CRS
- (1) the relationships and services that it offers to retail customers; (2) its fees and costs; and (3) its conflicts of interest, and whether the broker-dealer discloses any disciplinary history.
- Broker-Dealer Financial Responsibility Rules
- compliance with the net capital rule and the customer protection rule and related internal processes, procedures, and controls
- Broker-Dealer Trading-Related Practices and Services
- Areas of review will consider the structure, marketing, fees, and potential conflicts associated with offerings by broker-dealers to retail customers, including bank sweep programs, fully-paid lending programs, and mobile apps/online trading platforms.
Additionally, the SEC included a focus on Self-Regulatory Organizations, Clearing Agencies, and other market participants.
Industry-Wide Exam Focuses
Cybersecurity
“Particular attention will be on firms’ policies and procedures, governance practices, data loss prevention, access controls, account management, and responses to cyber-related incidents, including those related to ransomware attacks. The Division will also review alternative trading systems’ safeguards to protect confidential trading information.”
Regulation S-ID and Regulation S-P
“The Division will assess registrant 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. In addition, the Division will focus on firms’ policies and procedures as they pertain to safeguarding customer records and information at firms providing electronic investment services…”
Shortening of the Settlement Cycle
“The Division will evaluate advisers’ compliance with amended books and records requirements associated with T+1. The Division will also consider advisers’ operational changes, or impacts related to adviser facilitation of institutional transactions that are involved in the allocation, confirmation, or affirmation processes subject to Rule 15c6-2(a).”
Emerging Financial Technologies
The Division remains focused on registrants’ use of certain services, such as automated investment tools, AI, and trading algorithms or platforms, and the risks associated with the use of emerging technologies and alternative sources of data… When conducting these reviews, assessments generally will include whether: (1) representations are fair and accurate; (2) operations and controls in place are consistent with disclosures made to investors; (3) algorithms produce advice or recommendations consistent with investors’ investment profiles or stated strategies; and (4) controls to confirm that advice or recommendations resulting from digital engagement practices are consistent with regulatory obligations to investors, including older investors.”
Crypto Assets
“Given the volatility and activity involving the crypto asset markets, the Division will continue to monitor and, when appropriate, conduct examinations of registrants offering crypto asset-related services. Examinations of registrants will focus on the offer, sale, recommendation, advice, trading, and other activities involving crypto assets that are offered and sold as securities or related products, such as spot bitcoin or ether exchange-traded products.”
Regulation Systems Compliance and Integrity (SCI)
“As part of the Division’s examination of SCI entities, reviews will focus on:
- The policies and procedures regarding the operational, business continuity planning and testing practices of SCI entities.
- The effectiveness of incident response plans.
- The policies and procedures pertaining to the security operations management tools employed by SCI entities…”
AML
“The Division will continue to focus on AML programs and review whether broker-dealers and certain RICs are: (1) appropriately tailoring their AML program to their business model and associated AML risks; (2) conducting independent testing; (3) establishing an adequate customer identification program, including for beneficial owners of legal entity customers; and (4) meeting their SAR filing obligations. Examinations of certain RICs will also review policies and procedures for oversight of applicable financial intermediaries.
Lastly, the Division will review whether broker-dealers and advisers are monitoring the Department of Treasury’s Office of Foreign Assets Control sanctions and ensuring compliance with such sanctions.”
Still have questions on how to effectively meet SEC Exam Priorities? Interested in learning more about how COMPLY enables compr4ehensive compliance program management? Let’s talk.
All information sourced from the SEC. For the full 2025 Exam Priorities, visit the SEC website.