SEC Releases FY2027 Examination Priorities: What Registrants Should Know Heading into the New Year

On Oct. 23, the SEC’s Division of Examinations (Division) released its Fiscal Year 2027 examination priorities that will apply to more than 34,000 SEC registrants. While the 2027 priorities echo many of the core themes from prior years, the FY2027 priorities include five notable shifts:

• Closer coordination with other regulators. This includes an enhanced framework with the Commodity Futures Trading Commission (CFTC) that will deepen the agencies’ coordination, including through opportunities for joint or coordinated examinations.
• (SI) replaces artificial intelligence as the Division’s term for advanced technology. The focus now extends to SI-enabled cyberattacks and deepfakes.
• More detailed scrutiny of private credit and illiquid products. This applies to advisers, funds, and broker-dealers.
• A sharper AML focus. In addition to the AML priorities emphasized in prior years, the Division has made targeting cross-border pump-and-dump schemes a key examination focus, coordinated with the SEC’s Cross-Border Task Force. AML compliance has taken on heightened focus, particularly in light of the recent multi-agency settlement with Bank of America regarding AML and economic sanctions deficiencies.
• New market-structure topics. These include tokenization, Treasury clearing, and quantum computing.

The FY2026 priorities were the first issued under Chairman Paul Atkins, who said examinations “should not be a ‘gotcha’ exercise.” FY2027 continues that approach, with the Division describing itself as “accessible and integrated.” As part of its commitment to accessibility, the Division published earlier this month “The SEC Exam Handbook: A Practical Guide on Process and Engagement,” which replaces the prior examination brochure and provides registrants with further detail on what to expect during examinations.

Notably, the SEC’s commitment to integration deserves particular attention. Although the Division already shares examination observations with the SEC’s policymaking divisions regularly, it is working to deepen that coordination, in part to promote the consistent application of the federal securities laws.

While continuing to strengthen coordination within the SEC, the Division is deepening its collaboration with other federal agencies and regulatory bodies. For instance, an enhanced Memorandum of Understanding (MOU) with the CFTC provides for “coordinated examination planning and opportunities for joint or aligned examinations.” Meanwhile, the SEC also recently announced an MOU with the Food and Drug Administration to “bolster cooperation and ensure market integrity.” A separate MOU governs coordination with the National Futures Association, and the Division is also expanding its cooperation with the Financial Industry Regulatory Authority (FINRA) and foreign securities regulators, including, most recently, the French Autorité des Marchés Financiers.

Beyond coordinating with other SEC divisions and other U.S. and foreign regulators, the Division has built an examination projection model to improve risk-based resource allocation, and it is identifying where SI tools may be used in its own examinations to “detect patterns and risks across complex datasets.” For dually registered firms and firms with derivatives businesses, information produced in one exam may now reach several regulators. Exams may also be more targeted, with firms selected based on data.

How the Exam Priorities Have Evolved

Key Developments by Registrant Type

Investment Advisers

Economic conflicts of interest are the main adviser theme. The Division cites its June 9 Risk Alert and will examine fee rebates, fee and expense calculations, cash management, and quid pro quo arrangements. Examiners will also review how advisers form their investment advice, including liquidity, volatility, performance projected across different market conditions, and costs (including exit costs). Advisers that recommend illiquid or complex products will receive priority. Examples include private fund and business development company (BDC) loans, special purpose vehicles, single-stock and inverse ETFs, and zero-days-to-expiration options.

The report also adds several topics that were not as prominently prioritized in earlier years:

• Advisers’ reliance on proxy advisory firms
• Compliance programs at advisers that have grown through mergers or acquisitions, or that operate across dispersed branch offices
• Whether advisers with activist engagement practices file Schedules 13D and 13G and Forms 13F, 13H, 3, 4, 5, and N-PX timely and accurately

The last item is critical for activist and event-driven managers, as late beneficial ownership filings remain an active enforcement area.

Registered Funds

The Division will focus on fund fees and waivers, and on whether portfolio management matches stated strategies. The Division will also monitor funds that hold private credit and other illiquid assets, with attention to valuation, redemptions, and conflicts. Other areas include leveraged funds such as BDCs and inverse and leveraged ETFs, and funds operating under exemptive orders.

Broker-Dealers

The financial responsibility focus will continue to cover the Net Capital Rule and the Customer Protection Rule, as well as prime brokerage concentration and counterparty risk. Included in the Division’s priorities are the more recent amendments to the Customer Protection Rule that relate to daily reserve computations and Treasury clearing. On trading, examiners will review:

• Liquidity providers in extended-hours trading
• Best execution
• Pricing of illiquid private credit and private equity

The Regulation Best Interest list of high-risk products includes variable and registered index-linked annuities, ETFs holding private assets, zero-days-to-expiration options, and structured products. The Division will also prioritize review of certain recommendations, such as switches into substantially similar products and recommendations made to older investors. To inform future policy, the Division will review payments to unregistered finders and transaction-based compensation paid to personal-service entities not registered as broker-dealers.

Market Infrastructure

Notably, during FY2027 the Division’s clearing agency exams will treat tokenization as a high-risk area. They will also cover the new rules on expanded Treasury clearing, recovery and wind-down plans, and the role of central matching service providers in facilitating straight-through processing. Meanwhile, Regulation SCI exams will address SI, tokenization, extended trading hours, and quantum computing, as well as reliance on cloud and other third-party vendors. Lastly, transfer agent exams will look at the use of emerging technology to perform transfer agent functions.

Technology and Cyber: From AI Representations to SI Threats

While earlier priorities focused on whether firms accurately described their AI capabilities, FY2027 emphasizes a threat-based focus. Examiners will assess how firms prepare for SI-generated phishing and for “synthetic or deepfake voice and video used for social engineering.”  They will also review how firms monitor SI used in fraud detection, AML, Regulation Best Interest compliance, and trading. Reviews of automated advice will still test whether representations are accurate and whether algorithms produce recommendations consistent with investor profiles.

The examination focus with respect to Regulation S-P has moved from readiness to testing. Examiners will review response programs related to the unauthorized access to, or use of, customer information, such as customer notification procedures and oversight of service providers. The Division will also continue to assess compliance with Regulation S-ID, with examiners reviewing whether identity theft programs address account takeovers, fraudulent transfers, and risks from SI and stolen credentials.

Securities Enforcement Implications

Registrants should be mindful of several heightened enforcement risks that track the FY2027 examination priorities.

• Cross-border manipulation. AML exams will be coordinated with the SEC’s Cross-Border Task Force on pump-and-dump schemes involving foreign-based issuers. Broker-dealers with foreign omnibus or “nested” relationships face exposure to both the SEC and the Department of Justice if beneficial owners are unknown and suspicious activity reports are not filed consistent with regulatory obligations.
• Undisclosed conflicts of interest. Undisclosed revenue sharing, rebates, and fee errors have historically led to enforcement referrals, and the June 2026 Risk Alert signals continuing staff attention.
• Valuation of illiquid assets. Valuation of private credit and private equity is reviewed in adviser, fund, and broker-dealer exams. Inconsistent marks across business lines are a common red flag for the SEC and could form the basis of a fraud theory.
• Information sharing across regulators. Joint exams with the CFTC and coordination with FINRA and foreign securities regulators increase the chance of parallel inquiries.  Firms should manage privilege and production logs carefully and involve counsel early when exam questions turn to possible misconduct.

Taken together, the priorities outlined by the SEC and their associated enforcement risks suggest registrants should assess what testing and enhancement may be needed.