SEC's 2026 Division of Examinations Priorities: What Investment Advisers and Broker-Dealers Need to Fix Before Examiners Arrive

TL;DR

• The SEC Division of Examinations published its 2026 priorities in November 2025 — the top themes are investment adviser fiduciary standards, compliance program effectiveness, AI governance, Reg S-P incident response, and broker-dealer financial responsibility
• Investment adviser examiners are looking past technical policy existence to ask whether programs actually work: generic policies, checklist annual reviews, and unaddressed root causes are the most common findings
• Broker-dealer examinations focus on financial responsibility rules and liquidity risk, including whether firms have assessed the operational impact of losing a critical vendor
• Newly registered advisers and never-examined firms are specific exam selection priorities — a “welcome to the neighborhood” exam can land anytime

If you read yesterday’s post on FINRA’s 2026 Annual Regulatory Oversight Report and thought “what is the SEC focused on?” — this one’s for you.

The SEC Division of Examinations released its 2026 examination priorities in November 2025, three weeks before FINRA published its report. Reading both together is the only way to get a complete picture of what your compliance program will face this examination cycle — especially if your firm is dual-registered or serves retail clients across both channels.

Here’s the practitioner breakdown of what the SEC is actually examining.

What the 2026 Examination Priorities Are and How to Use Them

The Division of Examinations (formerly OCIE) publishes annual priorities to identify practices and areas that present heightened investor or market risk. Like FINRA’s Annual Regulatory Oversight Report, this document isn’t an enforcement action and isn’t a rule — but it functions as a public signal of where examiners are trained to look.

The 2026 priorities apply across four registrant categories: investment advisers, investment companies (mutual funds, closed-end funds, ETFs), broker-dealers, and transfer agents. The same thematic risks — AI governance, cybersecurity, AML, conflicts of interest — appear across multiple registrant categories because they’re systemic, not entity-specific.

Use this document as a gap analysis template. Go section by section, apply each priority to your firm’s current program, and document where you match the expected standard and where you don’t. That documentation serves two purposes: it shows you where to remediate, and it demonstrates to an examiner that your firm engaged with the priorities if they ask how you prepared.

Investment Adviser Focus Areas

Fiduciary Duty: Conflicts of Interest and Portfolio Management

The fiduciary standard is an investment adviser’s most fundamental obligation under the Advisers Act, and it’s been the central examination theme for multiple cycles. The 2026 priorities continue that focus with specific attention on:

Conflicts of interest disclosure and management. For investment advisers, the obligation is more demanding than Reg BI’s conflict standards for broker-dealers: all material conflicts must be disclosed and managed, not just those that can’t be adequately managed by disclosure. Examiners will look at adviser structures and business activities to identify conflicts — fee arrangements, revenue sharing, affiliated product recommendations, soft dollar practices — and assess whether disclosure is accurate and current, and whether the policy manages the conflict or just describes it.

Portfolio management consistency with client profiles. The 2026 priorities flag portfolio management and trading as a specific examination focus: whether investment recommendations are consistent with clients’ stated investment objectives, risk tolerance, time horizons, and liquidity needs. For advisers who manage client accounts against model portfolios, examiners may pull a sample of accounts and look for unexplained deviations — accounts holding positions materially inconsistent with what the client profile indicates is appropriate.

Best execution. Following the SEC’s amended best execution rule, advisers’ execution methodologies are an explicit examination area. Advisers should be able to demonstrate a documented execution methodology that is applied consistently, reviewed periodically, and results in reasonably favorable terms for clients.

Compliance Program Effectiveness: The Shift the 2026 Priorities Signal

This is the most operationally significant focus area in the document, and the one most likely to produce examination findings for advisers who haven’t updated their annual review methodology.

The SEC’s 2026 priorities signal a shift from “do you have a compliance program?” to “does your compliance program actually work?” Specifically, the priorities note that annual reviews under Rule 206(4)-7 should identify root causes of compliance issues and lead to meaningful program improvements — not just checklist completion or restated policies.

The recurring deficiency pattern: advisers that run annual reviews as paperwork exercises — concluding that “policies are adequate and effective” without testing whether that’s true — are exactly what the 2026 examiner is trained to probe. A review that restates existing policies without evaluating whether controls behind those policies function as designed does not meet the standard the SEC is applying this cycle.

A compliant review identifies specific compliance incidents and near-misses from the prior year, evaluates root causes, produces specific remediation actions with owners and timelines, and documents the conclusion alongside the evidence used to reach it. Full analysis in the companion post on annual compliance program reviews under Rule 206(4)-7.

Newly registered and never-examined advisers. The Division will prioritize examination of advisers that have been registered but never examined. If your firm registered in the past two to three years and hasn’t received a deficiency letter, you’re on the selection list. “Welcome to the neighborhood” exams establish baseline governance and controls expectations — and findings in those exams set a remediation record that will be tracked in subsequent cycles.

Broker-Dealer Focus Areas

Financial Responsibility Rules

The 2026 priorities emphasize broker-dealer financial responsibility rules: net capital requirements, customer protection under Rule 15c3-3, and liquidity risk. This is an area where technical deficiency — not just policy gaps — can trigger enforcement.

The Division’s specific callout of liquidity risk and reliance on third-party service providers is significant. Examiners will ask whether firms have assessed the operational impact of losing a critical vendor — their clearing firm, trading platform, data provider, or core technology infrastructure. This mirrors FINRA’s 2026 report emphasis on third-party vendor management: both regulators are asking how prepared firms are for vendor disruptions, not just whether they have vendor oversight policies on paper.

Regulation Best Interest and Form CRS

Reg BI and the related Form CRS remain in scope for retail-facing broker-dealers. The examination focus:

Form CRS accuracy. Form CRS is supposed to summarize key firm information — services, fees, conflicts, and disciplinary history — in plain language. Examiners check whether the current Form CRS accurately reflects current business practices, whether it’s being delivered to retail customers at the required relationship initiation point, and whether material changes trigger updates. A Form CRS that describes services the firm no longer offers, or omits a conflict that arose since the form was last updated, is the deficiency pattern.

Conflicts in retail sales practices. Reg BI’s Conflict of Interest Obligation requires firms to identify and disclose conflicts and mitigate those that can’t be managed by disclosure alone. Mobile app content and digital disclosure channels are an explicit examination focus — the same area FINRA flagged in its 2026 Oversight Report for false, misleading, and unbalanced options risk disclosures.

Technology: AI Governance and Cybersecurity

AI Governance Across Advisory, Trading, and Compliance Functions

The 2026 priorities reflect meaningfully expanded examination emphasis on AI governance. The Division will assess whether firms have adequate policies and procedures to monitor and supervise their AI use — across customer-facing applications, investment decision support tools, and compliance monitoring.

This is not prescriptive about framework structure. But the examination expectation is that:

• Policies exist describing permitted and prohibited AI use cases
• Someone owns AI oversight for the firm
• AI applications touching client communications, investment decisions, or regulatory analysis have been assessed for compliance risk before deployment, not retrofitted after

For investment advisers specifically, AI-assisted portfolio management and AI-generated client communications are the highest-risk applications. Both raise fiduciary duty questions if the AI introduces errors, bias, or incomplete disclosures that aren’t caught by a human review layer.

For documentation requirements that support both SEC and FINRA AI governance expectations, see the post on AI audit trail requirements for financial services.

Cybersecurity and Regulation S-P

Cybersecurity practices remain a top examination priority, with specific focus on Reg S-P compliance following the 2024 amendments. The amendments added two new requirements:

1. A written incident response program (IRP) reasonably designed to detect, respond to, and recover from unauthorized access to customer information
2. Customer notification within 30 days of discovering a data breach affecting covered personal information

The compliance deadline for smaller investment advisers (under $1.5 billion AUM) was June 3, 2026 — just 25 days before today’s publication date. Advisers that updated their written IRP policies but didn’t operationalize them (assign roles, test the plan, integrate breach notification procedures) are the specific examination target.

Full analysis of the Reg S-P amendment, what the incident response program must contain, and what smaller advisers needed to have in place by June 3 is here.

AML and Digital Assets

AML Program Quality

The Division continues to examine AML programs at broker-dealers and investment companies. The examination focus aligns with the broader regulatory push toward effectiveness-based AML: not whether monitoring scenarios exist, but whether they’re calibrated to the suspicious activity patterns relevant to the firm’s specific business. This aligns with FinCEN’s AML/CFT NPRM emphasis on risk-based program design.

Digital Assets

Digital asset businesses, advisers to digital asset funds, and digital asset exchanges remain a specific examination category. Focus areas include custody arrangements, asset valuation practices, and whether investor disclosures accurately represent the risks and structure of digital asset positions.

The Pre-Exam Gap Analysis: Putting Both Reports Together

The SEC’s 2026 priorities and the FINRA 2026 Annual Regulatory Oversight Report are most powerful when read together. Their overlapping areas identify where examination attention is concentrated regardless of which agency walks through the door:

For dual registrants, all five areas overlap. The self-assessment question for each is the same: not “do we have a policy?” but “would an examiner agree the policy is working?”

Run through this table with your team now. Document what the honest answer is for each row. The firms that get the best examination outcomes are the ones that identified the gap before the examiner did — and can show a remediation plan already in progress.

The KRI Library includes compliance program health KRIs — annual review completion tracking, policy exception rates, control failure counts, and third-party oversight metrics — that give you the monitoring evidence to demonstrate program effectiveness when examiners ask. Pre-built green/amber/red thresholds. Immediate download.

Sources:

• SEC Division of Examinations Announces 2026 Priorities (November 2025)
• 2026 SEC Exam Priorities and Implications for Investment Advisers — Harvard Law School Corporate Governance Blog (December 2025)
• 2026 SEC Exam Priorities for Registered Investment Advisers — Goodwin (December 2025)
• Observations on the SEC’s 2026 Examination Priorities — Dorsey (December 2025)
• FINRA 2026 Annual Regulatory Oversight Report (December 2025)