SEC Division Of Examinations' Fiscal Year 2026 Priorities: Focusing On Speeding Tickets, Not Parking Tickets

On November 17, 2025, the Division of Examinations ("Division" or "Exams") of the Securities and Exchange Commission ("SEC") published its examination priorities ("Examination Priorities") for fiscal year 2026.¹ While recognizing the important role examinations play in accomplishing the SEC's mission, Chairman Paul Atkins remarked that they "should not be a 'gotcha' exercise" and that the Examination Priorities should enable firms to prepare to have a "constructive dialogue" with SEC examiners.² Acting Director Keith Cassidy added that the Division was striving to improve compliance in a way that was both transparent and practical.³ Consistent with these statements and Chairman Atkins' announced return of the SEC to its "core mission"⁴, we do not expect SEC examiners to pursue deficiency findings based on novel legal theories. Similarly, firms may have greater opportunities to avoid enforcement referrals if they are proactive in remediating examination findings.

The Examination Priorities indicate a back-to-basics approach, where core focus areas, such as retail investor protection and market integrity, sit at the helm of the examination program. Other focus areas highlighted by the Examination Priorities include firms' cybersecurity practices, operational resiliency (particularly relating to core regulated activities) and supervision of "emerging financial technology", such as artificial intelligence. Firms should review their policies and procedures, with special attention to the areas identified in the Examination Priorities, to prepare for SEC examiners' arrival now that the federal government shutdown has come to an end.

Contrary to the 2024 and 2025 Examination Priorities, where crypto assets were specifically listed as a focus, the 2026 Examination Priorities make no mention of crypto assets. This appears to be consistent with the SEC's formation of the Crypto Task Force and its efforts to move away from non-fraud-related crypto enforcement actions and examinations and instead focus on developing a "comprehensive and clear regulatory framework for crypto assets," including clarifying under which circumstances the SEC has jurisdiction over transactions and registrants.⁵

Investment Advisers

As expected, Exams highlighted its sharp focus on ensuring firms adhere to fiduciary standards of conduct, with particular emphasis on the following areas:

• Alternative Investments: Products with associated illiquidity are flooding the market to meet investor demand for strategies that have traditionally been restricted to accredited investors. Some regulators, including individual Commissioners, have suggested that these investment products may be suitable for certain retail investors, particularly long-term investors such as 401(k) plan participants,⁶ but the risks associated with investments in alternative products must be considered, documented and clearly disclosed.
• Older Retail Investors: Older investors present a unique risk, in that they generally have more assets but less risk tolerance. Investment advisers need to navigate this paradox carefully and be able to defend their processes.
• Complex Products: Care should be taken with these products. For instance, leveraged exchange-traded funds ("ETFs") are typically highly volatile products and, as the terms of their own disclosures often state, are generally suitable for intraday trading by sophisticated institutional investors, and typically not for extended holding by retail investors.
• Higher-Cost Investments: Where certain products charge higher fees, investment advisers must be prepared to demonstrate that recommendations for these products are made thoughtfully, particularly in cases where the fees may create a financial conflict with the investment adviser. The SEC staff was clear that where lower-cost similar products are available, they will be asking tough questions.
• Private Funds: Exams will prioritize review of investment advisers new to the private fund space and the associated conflicts that can develop between private funds and other clients, particularly separately managed accounts or registered funds.⁷
• Filings Under Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act"): Investment advisers have an obligation to understand and comply with beneficial ownership reporting requirements, and this area is easy for examiners to test (comparing investment adviser holdings with EDGAR filings). A failure to file such reports often invites more questions from examiners as to the efficacy of an investment adviser's regulatory compliance policies more generally.
• Never-Examined Advisers and Recently Registered Advisers: Examiners often look at newly registered investment advisers early in their existence to ensure they establish sound practices from the outset. Major issues that are identified early can be fixed, but if allowed to fester, even small issues can become intractable problems after a few years. As a rule, examiners do not disclose the reason for initiating an examination of an investment adviser—for example, whether the examination is routine or prompted by a tip, complaint or referral. However, if asked, examiners are permitted to confirm whether or not the reason the examination is being conducted is that the registrant is newly registered.

Another historical focus point absent in the Examination Priorities is the Marketing Rule. The rule is no longer explicitly listed as an examination priority, signaling that compliance expectations regarding the "new" Marketing Rule amendments, which have been effective since 2021, are now fully integrated into the examination process. This does not mean that marketing materials will not be requested and reviewed, however, so it is important to pay attention to the technical requirements of the Marketing Rule. We also expect that endorsements, particularly in the context of private funds, will be an area of review.

Broker-Dealers

Consistent with long-standing SEC priorities and FINRA's recent focus areas, the SEC's 2025 Examination Priorities for broker-dealers continue to emphasize three core themes: financial responsibility, trading and sales practices, and retail investor protection.

• Financial Responsibility: Examiners will continue to focus on compliance with the Exchange Act's foundational safeguards—the net capital rule and customer protection rule. The Examination Priorities stress the need for broker-dealers to maintain operational resiliency and establish adequate controls to manage risks to the firm, its customers and the markets more broadly. Exams highlighted firms' need for controls to manage risks posed by vendors, including change management; and credit, market and liquidity risk during stress events. Additionally, examiners will assess cash sweep programs and prime brokerage activities, with particular attention to concentration, liquidity and counterparty credit risks, as applicable.

• Trading Practices and Services: Although proposed Regulation Best Execution was withdrawn, best execution remains a priority along with asset pricing/valuation and order routing and execution disclosures.⁸ Exams also flagged concerns about firms' reliance on the bona fide market making exception to Regulation SHO's locate requirement, questioning whether current practices align with the exception.⁹ Additionally, examiners will review alternative trading systems' ("ATSs") written safeguards to protect subscriber confidential information and check whether those safeguards align with ATS-related disclosures.

• Retail Sales Practices/Regulation Best Interest ("Reg BI"): The Examination Priorities continue to prioritize retail investor protection, with particular attention to older investors and those saving for retirement or education. The Trump Administration and SEC officials have encouraged opening private markets to retail investors, including retirement accounts,¹⁰ but the SEC acknowledges that guardrails are appropriate in the sale of these products, which may be illiquid or difficult to understand.¹¹ Dual registrants should expect scrutiny of how they determine product offerings and allocate assets between brokerage and advisory accounts. Firms can prepare for an examination by reviewing their Reg BI policies, documentation and training to ensure they have a well-documented rationale for recommendations that satisfy Reg BI's Care Obligation—particularly for complex products and account types—and by confirming that conflicts of interest related to allocation practices are identified and addressed. Finally, Form CRS remains an easy target for examiners to review disclosures for completeness, clarity and accuracy.

All Market Participants

One key area we will highlight is safeguarding customer information, which remains a focus for SEC examiners across different categories of market participants. The Examination Priorities include compliance with the 2024 amendments to Regulation S-P ("Reg S-P"), which absent SEC action have compliance dates as early as December 3, 2025.¹²

• All "covered institutions" (i.e., broker-dealers, investment advisers, registered funds, transfer agents and funding portals) should be aware of the Reg S-P amendments, including (1) the new requirement to design an "incident response program" to detect, contain and control unauthorized access to or use of customer information (including resulting from "service providers"¹³), (2) an expanded scope of information and entities covered by Reg S-P's safeguarding and disposal requirements, and (3) new recordkeeping requirements for covered institutions.
• Covered institutions need written policies and procedures covering document destruction and oversight of their service providers sufficient to be assured of timely communication of breaches resulting in unauthorized access to customer information. While contractual provisions on this point are not required, many firms have decided to repaper service agreements to incorporate Reg S-P notice provisions.

Footnotes

1. Division of Examinations, Fiscal Year 2026 Examination Priorities (Nov. 17, 2025), available at https://www.sec.gov/files/2026-exam-priorities.pdf

2. See Press Release, SEC Division of Examinations Announces 2026 Priorities (Nov. 17, 2025), https://www.sec.gov/newsroom/press-releases/2025-132-sec-division-examinations-announces-2026-priorities?utm_medium=email&utm_source=govdelivery.

3. Id.

4. Chairman Paul S. Atkins, Remarks of Chairman Paul S. Atkins (Apr. 22, 2025), https://www.sec.gov/newsroom/speeches-statements/atkins-white-house-042225 (stating, "It is time for the SEC to end its waywardness and return to its core mission that Congress set for it: investor protection; fair, orderly, and efficient markets; and capital formation.").

5. See Press Release, SEC Crypto 2.0: Acting Chairman Uyeda Announces Formation of New Crypto Task Force: Commissioner Hester Peirce will lead agency-wide effort (Jan. 21, 2025), https://www.sec.gov/newsroom/press-releases/2025-30

6. Commissioner Mark T. Uyeda, The Diversification Deficit: Opening 401(k)s to Private Markets (Nov. 20, 2025), https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-diversification-deficit-opening-401ks-private-markets-112025?utm_medium=email&utm_source=govdelivery (stating, "Private investments, while less liquid, can offer a premium for that illiquidity. For long-term investors—such as those saving for retirement—this tradeoff can be not only acceptable but desirable. These investors do not require daily liquidity and may benefit from the higher expected returns associated with longer holding periods.").

7. Examination Priorities, at 5.

8. See, e.g., 17 C.F.R. § 242.605.

9. In the proposing release for the now-vacated rules that would have further defined "dealer" and "government securities dealer," the SEC expressed skepticism regarding firms' reliance on the bona fide market making exception where they do not publish continuous quotations or where they publish quotations that are not publicly accessible, are not near or at the market, or are skewed directionally toward one side of the market. See Further Definition of "As a Part of a Regular Business" in the Definition of Dealer and Government Securities Dealer, 87 Fed. Reg. 23054, 23068 n.157 (Apr. 18, 2022). FINRA has expressed similar concerns over the past several years. See, e.g., FINRA, 2025 Annual Regulatory Oversight Report (Jan. 2025), https://www.finra.org/rules-guidance/guidance/reports/2025-finra-annual-regulatory-oversight-report/regulation-sho.

10. Chairman Paul S. Atkins, Remarks at the Investor Advocacy Committee Meeting (Sept. 18, 2025), https://www.sec.gov/newsroom/speeches-statements/atkins-091825-remarks-investor-advisory-committee-meeting; White House, Democratizing Access to Alternative Assets for 401(k) Investors (Aug. 7, 2025), https://www.whitehouse.gov/presidential-actions/2025/08/democratizing-access-to-alternative-assets-for-401k-investors/.

11. In particular, Exams called out "variable and registered index-linked annuities; ETFs that invest in illiquid assets such as private equity or private credit; municipal securities, including 529 Plans; private placements; structured products; alternative investments; and other products that have complex fee structures or return calculations, are based on exotic benchmarks, are illiquid, or represent a growth area for retail investment."

12. Large firms have a compliance deadline of December 3, 2025, while smaller firms have until June 3, 2026.

13. Regulation S-P defines "service providers" as "any person or entity that receives, maintains, processes, or otherwise is permitted access to customer information through its provision of services directly to a covered institution."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.