SEC Sets 2027 Exam Priorities with Focus on Conflicts, Complex Products, and Technology

On October 23, 2026, the U.S. Securities and Exchange Commission (SEC) Division of Examinations (EXAMS) published its annual examination priorities (2027 Priorities)¹ , outlining areas of perceived risk and topics on which EXAMS will focus in the new fiscal year.

Substantively, many core themes from last year’s priorities carry over. The 2027 Priorities again underscore the importance of registrants’ standards of care, information security, and operational resiliency as well as the risks presented by alternative and complex products and investment strategies. The 2027 Priorities also (i) reflect an increased focus on artificial intelligence (AI), which the report refers to as “super intelligence” or SI and (ii) introduce certain new areas of focus, such as advisers’ reliance on proxy advisory firms and compliance with new rules or amendments to existing rules. This Sidley Update summarizes the examination focus areas across investment advisers, investment companies, broker-dealers, and other market participants, and it notes where the 2027 Priorities depart from the prior year’s.²

Our Take

• Compliance with the fiduciary standard of conduct remains a core focal point for investment advisers, with EXAMS indicating that it will prioritize reviews relating to economic conflicts of interest. EXAMS ties this focus to its June 9, 2026, Risk Alert on economic conflicts³, which highlighted issues presented by undisclosed or inadequately disclosed conflicts and practices inconsistent with advisory agreements. The 2027 Priorities identify examples of potential financial conflicts to be reviewed, including fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, and deposits and withdrawals. EXAMS will also focus on advisers who use certain third-party service providers (including providers that access clients’ accounts) and advisers who rely on proxy advisory firms, scrutinizing whether such reliance satisfies applicable legal obligations.
• For broker-dealers, EXAMS will continue to prioritize financial responsibility rules, trading-related practices and services, retail sales practices (including compliance with Regulation Best Interest, or Reg BI), and anti-money-laundering (AML) programs.
• Private credit and other complex and higher-risk products are areas of focus across examinations of investment advisers, investment companies, and broker-dealers. The 2027 Priorities highlight products that are illiquid or difficult to trade or otherwise involve unusual features. Examples include loans made by private funds and business development companies, exchange-traded funds (ETFs) based on less liquid assets, option-based and single-stock ETFs, zero-days-to-expiration options, index-linked annuities, structured products, and private placements. EXAMS will focus on standards of conduct in recommending such products, particularly in the context of recent SEC efforts to expand retail access to alternative investments.⁴
• Emerging technologies remain a focus, with the 2027 Priorities acknowledging both the increasing integration of AI tools into workflows and the unique risks AI presents (e.g., with respect to phishing and other scam attempts). Firms should be ready to describe their AI inventory, governance, and monitoring controls and to show that identity theft and incident response programs account for AI-generated attacks and stolen credentials.
• Several items from the 2026 Priorities are no longer explicitly mentioned, including Rule 605 disclosures, the Regulation SHO bona fide market-making exception, alternative trading systems, cash sweep programs, the amended Names Rule, and the review of AML programs of registered investment companies (AML now appears only within the broker-dealer priorities). Those omissions are a reallocation of attention, not a reprieve; firms’ obligations remain, and examiners routinely pursue issues outside the published list of priorities. Cryptoassets are not discussed as an independent priority for a second year, although tokenization is now explicitly mentioned.
  
  

Investment Advisers

Adherence to Fiduciary Standards of Conduct
Examining advisers’ adherence to their duty of care and duty of loyalty remains a core priority, particularly for services provided to retail and older investors, including those saving for retirement. While not a new focus in examinations generally, new this year is EXAMS’ explicit statement that it will prioritize review of advisers’ fiduciary obligations relating to economic conflicts of interest. EXAMS will also evaluate how advisers formulate advice, including whether product characteristics fit client profiles and mandates. EXAMS will prioritize advisers that recommend products that are illiquid or difficult to trade or otherwise involve unusual features.

Examinations will also test whether advisers have assessed the reasonableness of their valuation processes and methodologies. EXAMS specifically identified loans made by private funds and business development companies, and investments in private companies through special purpose vehicles, among the difficult-to-trade or illiquid products on which it will focus. Advisers to private credit and other illiquid strategies should expect scrutiny of how those holdings are valued, and of whether liquidity and exit costs are weighed and disclosed when the products are recommended.

For private fund advisers, EXAMS will assess risk disclosures and whether controls address both fund-level and investment-level risks, including the use of debt and fund-level lines of credit, affiliated service providers, and the accuracy of fee and expense calculations at both levels. EXAMS will also focus on advisers that use third parties to access client accounts and on advisers that rely on proxy advisory firms, including how advisers evaluate proxy recommendations and whether reliance satisfies applicable legal obligations.

EXAMS will again prioritize advisers that have never been examined, with particular emphasis on recently registered advisers. These first-time examinations evaluate regulatory compliance and the adviser’s processes for identifying, addressing, and disclosing risks and conflicts. Newly registered private fund advisers should treat the conflicts and fee and expense themes above as likely examination topics.

Effectiveness of Advisers’ Compliance Programs
EXAMS remains focused on assessing the effectiveness of compliance programs, including program components addressing marketing, valuation, trading, portfolio management, disclosure and filings, and custody. Reviews will prioritize whether policies addressing conflicts of interest are reasonably designed and implemented and whether disclosures address fee-related conflicts arising from account and product compensation structures. EXAMS will also focus on advisers that have changed business models, grown through mergers or acquisitions, or, in a new reference, operate from multiple dispersed branch offices. These areas of focus are all consistent with, and most are discussed in, the new SEC Exam Handbook (see our earlier Sidley Update).

Investment Companies

EXAMS continues to prioritize registered investment companies (RICs) given their significance to retail and older investors, focusing on RIC operations relating to fees and expenses and on whether portfolio management practices and related disclosures align with stated investment strategies, fund filings, and marketing materials. Developing areas of interest identified by EXAMS include RICs holding complex products and less liquid or illiquid investments (including private credit) along with associated valuation, redemption, and conflict-disclosure issues. Other developing areas include RICs using novel or complex investment strategies, including funds with leverage vulnerabilities (e.g., business development companies and inverse and leveraged ETFs) and RICs operating in reliance on exemptive orders, including their implementation of and compliance with those orders.

Broker-Dealers

Broker-Dealer Financial Responsibility Rules
EXAMS will continue to focus on the Net Capital Rule, the Customer Protection Rule, and related controls, and these examinations may also encompass federal and Financial Industry Regulatory Authority margin regulations, which are interrelated with the net capital and customer protection rules. Staff priorities will now include recent amendments to the Customer Protection Rule relating to daily customer reserve computations and U.S. Treasury clearing, as may be applicable to a particular firm. EXAMS will also assess credit, market, and liquidity risk management controls, including whether firms have sufficient liquidity to manage stress events and to remain in compliance with the Net Capital and Customer Protection Rules, and will review prime brokerage activities for concentration, liquidity, and counterparty credit risks.

Broker-Dealer Trading-Related Practices and Services
Equity and fixed-income trading practices remain a priority. With more venues offering extended trading hours, EXAMS will review operational challenges; whether liquidity providers are willing, ready, and able to provide liquidity on and off exchange; and related market and credit risk controls. EXAMS will also review best execution and the pricing of illiquid instruments.

Retail Sales Practice, Including Compliance With Reg BI
Compliance with Reg BI remains a priority. EXAMS will focus on complex products and strategies, including variable and registered index-linked annuities, ETFs investing in illiquid assets, low-priced and small-capitalization securities, zero-days-to-expiration options, single-stock or focused-market ETFs, private placements, structured products, and alternative investments. EXAMS will also assess recommendations that move an investment to a substantially similar product; open different account types (e.g., option, margin, or self-directed IRA accounts); or target older and vulnerable investors. Finally, the 2027 Priorities indicate that examinations of dual registrants also remain a priority.

AML
Broker-dealer AML programs now appear in an expanded, dedicated section within the broker-dealer priorities rather than in the cross-cutting risk areas section as in the 2026 Priorities. Notably, the 2027 Priorities reflect a focus on foreign accounts and trading in foreign-based companies, including (i) compliance with AML requirements to address the heightened risks associated with foreign financial institution omnibus accounts and (ii) controls to account for the manipulation risk associated with trading in foreign-based companies. The Priorities explicitly state that EXAMS will coordinate with the SEC Cross-Border Task Force.

Supervision
A new standalone section states that EXAMS will evaluate (i) whether broker-dealers, funding portals, municipal advisers, and security-based swap dealers maintain supervisory systems and controls reasonably designed to achieve compliance, including for new business lines and products, and (ii) whether qualified individuals hold supervisory authority.

Risk Areas Affecting Multiple Market Participants

Emerging Financial Technologies
EXAMS acknowledges that registrants are increasingly using AI in investment analysis, customer management, and code development, while threat actors are using it to accelerate attacks. Examinations will focus on preparation for AI-related cyberattacks and on policies for monitoring AI use in fraud detection, back-office operations, AML and Reg BI compliance, and trading. Review of automated investment tools, trading algorithms, and alternative data sources also remains a priority.

Cryptoassets and Tokenization
Registrants offering, recommending, trading, or servicing crypto or tokenized products should continue to expect EXAMS to assess those activities under existing standards of conduct, disclosure, custody, and operational resiliency frameworks.

Regulation S-P
EXAMS will focus on whether firms have developed and implemented reasonably designed policies and procedures as required by Regulation S-P, which, in accordance with the amended rule, will include evaluation of response program policies and procedures for unauthorized access to or use of customer information, including customer notification procedures and oversight of service providers. EXAMS will also review how firms are addressing operational risk in efforts to safeguard customer information.

Regulation Systems Compliance and Integrity (SCI)
Regulation SCI examinations will focus on emerging trends, including AI, tokenization, extended trading hours, and quantum computing, and on SCI entities’ reliance on cloud and other third-party vendors

Thomas Archer and Simrat Kohli contributed to this Sidley Update.

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¹https://www.sec.gov/files/2027-exam-priorities.pdf.

²See our prior Sidley Update, U.S. SEC Division of Examinations Announces 2026 Exam Priorities (Nov. 19, 2025), available at https://www.sidley.com/en/insights/newsupdates/2025/11/us-sec-division-of-examination-announces-2026-exam-priorities.
³Division of Examinations, Risk Alert: Examinations Observations of Investment Adviser Obligations Related to Economic Conflicts of Interest (June 9, 2026), available at https://www.sec.gov/files/observations-ia-obligations-related-economic-conflicts-interest-060926.pdf.