SEC 2025 Examination Priorities, Simplified

The SEC 2025 Examination Priorities have been released, we want to make sure your firm is prepared for the year ahead…

The SEC Division of Examinations (EXAMS) states that over the course of fiscal year 2025, they will focus their examinations on the use of artificial intelligence (AI) and emerging technologies, cybersecurity, complex products, outsourcing, private fund advisers, and compliance with new and amended SEC rules.

We took the liberty of providing a summarized version of the SEC 2025 Exam Priorities to take note of; but do not let this keep you from examining the full document linked here.

Risk Areas Impacting Various Market Participants

Fiduciary Duty

Examining for advisers' adherence to their duty of care and duty of loyalty obligations remains a priority, the Division will continue to focus on:

Investment advice provided to clients regarding products, investment strategies, and account types, and whether that advice satisfies the fiduciary obligations owed to their clients.

Dual registrants and advisers with affiliated broker-dealers. The impact of advisers' financial conflicts of interest on providing impartial advice and best execution, with consideration given for non-standard fee arrangements.

Cybersecurity & Operational Resilience

The division will continue to review registrant practices to maintain the safety of investor information, records, and assets.

As cybersecurity attacks remain prevalent, registrants must maintain proper, secure practices to manage information security and operational risks of their clients.

Regulations S-ID & S-P

EXAMS will assess registrants' compliance with Regulations S-ID and S-P, focusing on firms' policies and procedures, internal controls, oversight of third-party vendors, and governance practices. Additionally, they will assess firms' efforts to address operational risk, as operational failures may impact a firm's ability to safeguard customer records and information.

Crypto Assets

Given the volatility of the markets, The Division continues to observe investments involving crypto assets and associated products and services. These examinations will focus on the offer, sale, recommendation, advice, trading, and other activities involving crypto-assets.

These examinations will review whether registrants:

• Meet and follow respective standards of conduct
• Routinely review, update, and enhance their compliance practices, risk disclosures, and operational resilience practices (if required).

Private Funds

The Division will continue to focus on advisers to private funds and prioritize specific topics, such as reviewing:

• 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.
• The accuracy of calculations and allocations of private fund fees and expenses (both fund-level and investment-level).
• Disclosure of conflicts of interests and risks, and adequacy of policies and procedures.
• Compliance with recently adopted SEC rules, including amendments to Form PF, and the updated rules that govern investment adviser marketing.

Emerging Technologies

EXAMS is maintaining focus on the use (and risks) of certain technology services such as automated investment tools, AI, and trading algorithms/platforms.

These assessments will likely include whether:

• Representations are fair and accurate
• Operations and controls in place are consistent with disclosures made to investors Algorithms produce advice or recommendations consistent with investors' investment profiles or stated strategies
• Controls to confirm that advice or recommendations resulting from digital engagement practices are consistent with regulatory obligations to investors, including older investor.

We advise you to review the full SEC 2025 Examination Priorities closely and evaluate your firm's compliance efforts to ensure your systems are up to date, routinely monitored, and properly enforced. As the SEC has pursued heavier enforcement actions in recent years, it is important that your organization has the proper systems in place to combat regulatory fines in 2025.

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