SEC Division of Examinations Publishes Fiscal 2027 Priorities

The Securities and Exchange Commission’s Division of Examinations published its Fiscal Year 2027 examination priorities on Oct. 23, 2026, setting out the areas the Division says currently present heightened risks to investors or market integrity across its more than 34,000 registrants. The annual report, announced in Washington, D.C., applies to investment advisers, investment companies, broker-dealers, self-regulatory organizations, clearing agencies, municipal advisors, transfer agents, funding portals, and security-based swap entities.

The Division developed the priorities in coordination with divisions and offices across the SEC, and said they reflect examination observations, market developments, investor concerns, industry engagement, and emerging trends affecting U.S. capital markets. The report supports the Division’s mission to promote compliance, prevent fraud, identify and monitor risk, and inform Commission policy. The Division emphasized that the priorities are not exhaustive: they identify areas warranting heightened attention based on current risk assessments, and the Division may adjust them during the year in response to market events, investor concerns, emerging technologies, and new products and services.

“Examinations are one of the Commission’s most important tools for promoting compliance with the federal securities laws and helping protect investors,” SEC Chairman Paul S. Atkins said.

“The markets we oversee continue to evolve rapidly, and the examination program must evolve with them,” said Keith Cassidy, director of the Division of Examinations. Cassidy said the Division’s approach allows it to adapt to changing market conditions, identify developing risk patterns, and deploy examination resources where they can have the greatest impact.

The release identifies eight key areas of focus for the fiscal year: adviser fiduciary obligations, conflicts of interest, investment recommendations, and compliance programs; retail investor protection involving complex, higher-risk, and illiquid products; private funds, private credit, and other complex investment strategies; broker-dealer financial responsibility, trading practices, supervision, and anti-money laundering compliance; operational resiliency, cybersecurity, and protection of customer information; emerging technologies, including super intelligence; market infrastructure risks, including Treasury clearing reforms and tokenization; and oversight of self-regulatory organizations and other critical market participants.

Adviser and Broker-Dealer Examinations

The FY 2027 Examination Priorities report states that adviser examinations will review full and fair disclosure of material facts, due diligence into recommended products, the effectiveness of compliance policies, and valuation processes, with particular attention to practices affecting retail and older investors saving for retirement. The Division will prioritize economic conflicts of interest, including fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, deposits, and withdrawals, citing a June 9, 2026 risk alert on conflict disclosures that were undisclosed, incomplete, or misleading. Advisers recommending difficult-to-trade, unusual, or illiquid products will also be prioritized, including private fund and business development company loans, special purpose vehicles investing in private companies, exchange-traded funds based on less liquid assets, option-based funds, inverse ETFs, single-stock ETFs, and zero-days-to-expiration options.

Compliance program reviews will cover marketing, valuation, trading, portfolio management, disclosure and filings, and custody, with focus on advisers that changed business models, grew through mergers or acquisitions, or operate geographically dispersed branch offices. The Division will review whether advisers with activist engagement practices make timely and accurate filings on Schedules 13D and 13G and Forms 13F, 13H, 3, 4, 5, and N-PX, and it will continue to prioritize advisers that have never been examined, with emphasis on recently registered advisers.

For registered investment companies, including mutual funds and ETFs, examinations will focus on fund fees and expenses, including waivers and reimbursements, and on whether portfolio management practices align with stated investment strategies. The Division will also monitor funds holding complex or less liquid investments, including private credit, funds with leverage vulnerabilities such as business development companies and inverse and leveraged ETFs, and funds operating under exemptive orders.

Broker-dealer examinations will cover the Net Capital Rule and the Customer Protection Rule, including recent amendments on daily customer reserve computations and U.S. Treasury clearing, along with liquidity risk controls and prime brokerage concentration, liquidity, and counterparty credit risks. With more trading venues offering extended hours, the Division will review operational challenges, the readiness of liquidity providers on and off exchange, best execution compliance in order routing, and the pricing and valuation of illiquid instruments such as private credit and private equity.

Regulation Best Interest reviews will address product and account recommendations, conflict identification and mitigation, reasonably available alternatives, the Disclosure Obligation, and the Care Obligation. Products of particular interest include variable and registered index-linked annuities, low-priced securities, zero-days-to-expiration options, single-stock ETFs, private placements, and structured products. Examinations will also review Form CRS content on services, fees, conflicts, and disciplinary history, and examinations of dual registrants and account allocation practices remain a priority.

Anti-money laundering reviews will assess whether broker-dealers tailor and update their programs, conduct independent testing, perform ongoing customer due diligence, and meet Suspicious Activity Report filing obligations. The Division will examine risks tied to trading in foreign-based companies, including pump-and-dump schemes, in coordination with the SEC Cross-Border Task Force, and will review special due diligence programs for foreign omnibus accounts, including nested account relationships, as well as monitoring of Office of Foreign Assets Control sanctions.

Infrastructure Oversight and Technology Risks

The Division will examine national securities exchanges on their regulatory programs and governance, and it conducts risk-based oversight examinations of FINRA, which the report states oversees approximately 3,184 brokerage firms, 146,826 branch offices, and more than 639,000 registered representatives. Similar risk assessment processes apply to the Division’s oversight of the Municipal Securities Rulemaking Board and its inspections of the Public Company Accounting Oversight Board, which the Sarbanes-Oxley Act of 2002 established to oversee audits of public companies and SEC-registered broker-dealers.

Title VIII of the Dodd-Frank Act requires the Commission to examine, at least once annually, each clearing agency designated as systemically important for which it serves as supervisory agency. Clearing agency examinations will focus on default risk management, recovery and wind-down, securities lending, operations, and tokenization, plus compliance with the SEC’s Standards for Covered Clearing Agencies and with new rules on expanded Treasury clearing and straight-through processing by central matching service providers.

Among other market participants, municipal advisor examinations will cover fiduciary duty to municipal entity clients, recommendations on pricing and competitive versus negotiated sales, and MSRB Rule G-42 conduct standards. Transfer agents will be examined on emerging technology use, recordkeeping, safeguarding of funds and securities, and compliance with Regulation S-P amendments, including incident response programs. Funding portal reviews will address arrangements with qualified third parties for maintaining and transmitting investor funds. Security-based swap dealer examinations will focus on Regulation SBSR reporting accuracy and remediation of issues identified in annual Chief Compliance Officer reports, while security-based swap execution facilities will be reviewed on trade monitoring and operational risk programs.

Cybersecurity examinations will review governance practices, data loss prevention, access controls, account management, and response and recovery protocols for incidents including ransomware attacks, as well as risks from third-party service providers and shared technologies. The Division said threat actors are using super intelligence, or SI, to automate and accelerate cyberattacks, and examinations will focus on registrants’ preparation for SI-generated phishing messaging and synthetic or deepfake voice and video used for social engineering. Reviews will also cover policies for monitoring SI use in fraud prevention and detection, back-office operations, AML and Regulation Best Interest compliance, and trading functions. For automated investment tools and trading algorithms, assessments will include whether representations are fair and accurate, whether operations and controls match investor disclosures, and whether algorithms produce advice consistent with investor profiles.

Regulation S-P examinations will evaluate safeguards and incident response programs, including customer notification procedures and oversight of service providers, while Regulation S-ID reviews will focus on identity theft red flags during customer account takeovers and fraudulent transfers, including whether firms update their Identity Theft Prevention Programs for risks tied to SI and stolen credentials. Regulation SCI examinations will focus on SI, tokenization of securities, extended trading hours, quantum computing, and SCI entities’ reliance on cloud and other third-party vendors.

The report’s leadership message states that the Division published “The SEC Exam Handbook: A Practical Guide on Process and Engagement” earlier in October 2026, replacing and expanding the previous examination brochure with a roadmap of each examination stage and avenues for feedback. An enhanced Memorandum of Understanding between the SEC and the Commodity Futures Trading Commission reaffirmed coordinated examination planning and opportunities for joint or aligned examinations, and a separate MOU with the National Futures Association supports similar coordination. Over the last two years, the Division said, it advanced an examination projection model for risk-based resource allocation and a metric-based framework to assess its effectiveness, and it is undertaking a modernization initiative under which SI-supported tools supplement but do not replace staff judgment. The document states that it represents the views of Division staff, is not a rule or statement of the Commission, and has no legal force or effect.