Key Takeaways from the SEC’s 2025 Examination Priorities
The U.S. Securities and Exchange Commission’s Division of Examinations released its examination priorities for Fiscal Year 2025 in October, placing a strong emphasis on investor protection, market integrity, and compliance with regulatory standards. These priorities, formulated before the results of the 2024 U.S. election were known, reflect insights from past exams and emerging risks, and underscore that even if the broader regulatory tone becomes more business-friendly, safeguarding the financial markets remains paramount. Below is an outline of the major themes compliance professionals and RegTech executives should be aware of – from fiduciary duties and robust compliance programs to broker-dealer standards, private fund oversight, and the integrity of market infrastructure. We’ll also consider how a post-2024 election landscape might (or might not) influence these priorities.
Fiduciary Standards: Putting Clients’ Interests First
Upholding Fiduciary Duty: Investment advisers are expected to act in their clients’ best interests at all times. Examiners will scrutinize whether advisers’ recommendations – especially for high-cost, illiquid, or complex products – truly align with each client’s objectives and risk tolerance. This means firms should be prepared to demonstrate that they recommend products because they are suitable for the client, not because they generate higher fees.
Focus on Risky or Complex Products: There’s particular attention on recommendations involving complex or high-fee investments. The SEC is concerned that such products (e.g. exotic alternatives or illiquid funds) can pose outsized risks to less sophisticated investors. Expect examiners to dig into the rationale for putting a client into these investments and whether all the pros and cons were fully disclosed. In practice, transparent disclosures about product risks and costs aren’t just good investor relations – they’re a regulatory expectation.
Compliance Program Expectations: Strengthening Internal Controls
Robust, Adaptive Compliance Programs: The SEC views a firm’s compliance program as the backbone of ethical practice. Examinations will assess the effectiveness of written policies and procedures – covering everything from valuation methods and trade oversight to custody arrangements and fee billing. It’s not enough to have a manual collecting dust; the program should be dynamic, updated for new regulations and evolving industry standards.
Conflict of Interest Management: One hallmark of a strong compliance program is how well a firm identifies and mitigates conflicts of interest. SEC examiners will check if advisors have processes to spot conflicts (for instance, situations where an advisor’s compensation could influence their advice) and to address them so that clients receive unbiased advice. In short, firms should anticipate the SEC asking: “How do you put the client’s interest ahead of your own, in practice?”
Testing and Accountability: While not a specific bullet in the SEC’s list, underlying these expectations is an assumption that firms are testing their compliance controls regularly. Busy professionals should ensure their compliance teams are conducting periodic reviews, training staff on policies, and promptly fixing any weaknesses. A well-documented, actively managed compliance program will go a long way in satisfying examiners’ expectations.
Broker-Dealer Obligations: Upholding Best Interests and Transparency
Reg BI – Best Interest Standard: For broker-dealers, complying with Regulation Best Interest (Reg BI) remains a top priority. Firms must be able to show that any investment recommendation made to a retail customer is in that customer’s best interest, not driven by higher commissions for the broker. SEC exams will evaluate how brokers have implemented Reg BI policies – with particular scrutiny on recommendations of complex or high-risk products to retail investors. Expect examiners to ask for proof that your firm is identifying and mitigating conflicts of interest and that your advisors are only selling products that truly fit the client’s financial situation and goals.
Form CRS – Clear Client Communications: Another ongoing obligation is Form CRS (Client Relationship Summary), a brief plain-language disclosure that broker-dealers must give to retail investors. The SEC will review your Form CRS to ensure it’s clear, accurate, and not misleading about your services, fees, conflicts, and any disciplinary history. In practice, this means jargon-free explanations and honest disclosures – the form should empower investors to make informed decisions about working with your firm. If your Form CRS glosses over important details or is buried in legalese, it’s time to fix that before an examiner points it out.
Financial Responsibility & Trading Practices: Beyond conduct standards, nuts-and-bolts financial responsibility is in focus. Examiners will check that broker-dealers are maintaining required net capital and properly safeguarding customer assets, as required by SEC financial responsibility rules. Additionally, trading operations will be scrutinized – the SEC wants to see robust risk management controls around trading, covering credit risk, market risk, liquidity risk, etc. For example, if your firm does proprietary trading or extends margin to customers, be prepared to show how you control potential losses and monitor for any trading that could harm market integrity.
Oversight of Private Funds and New Advisers: Heightened Scrutiny
Private Fund Advisers Under the Microscope: Advisers to private funds – such as hedge funds and private equity firms – are getting special attention in 2025. The SEC is zeroing in on conflicts of interest and fee transparency in this arena. This means exams will delve into areas like fund fee structures, expense allocations, and any dealings between affiliated entities that might disadvantage investors. If you manage a private fund, expect detailed questions on how you allocate costs (ensure you’re following your disclosures to clients) and whether you’ve fully informed investors about all the fees and risks involved. The message is clear: no hidden fees, no undisclosed conflicts. Investors in private funds should know exactly what they’re paying for and where potential conflicts lie.
New and Never-Examined Advisers: The SEC is also prioritizing newly registered investment advisers and those who haven’t been examined before. The goal is to instil a culture of compliance early on. If you’re a newer adviser (or one that for whatever reason hasn’t faced an exam in a long time), be prepared for the SEC to knock on your door. Examiners will be looking to see that you’ve put in place basic compliance infrastructure and internal controls appropriate for your business. They’ll likely review whether you understand and are following key regulatory requirements for advisers (like custody rules, ethical codes, and filings) and that you have policies to catch and prevent problems. Think of it as a proactive wellness check – the SEC wants to catch issues at young firms before they grow into bigger problems.
Market Infrastructure Examinations: SROs and Clearing Agencies
Self-Regulatory Organizations (Exchanges, FINRA, MSRB): In 2025, the SEC isn’t just looking at firms – it’s also examining the watchdogs of the markets themselves, namely the self-regulatory organizations (SROs). This includes the national securities exchanges (like NYSE or Nasdaq), the Financial Industry Regulatory Authority (FINRA), and the Municipal Securities Rulemaking Board (MSRB). SEC examiners will assess whether these entities are effectively enforcing their own rules and the federal securities laws, and whether they’re adequately policing their markets to prevent fraud and manipulation. For example, an exchange should be monitoring trading for red flags (suspicious price spikes, insider trading, etc.), and FINRA should be actively overseeing broker-dealer conduct and arbitration processes. Even the MSRB, which sets rules for municipal bond dealers, must demonstrate that its regulations and enforcement protect investors and keep the Muni markets fair. In short, the SEC is double-checking the guards at the gate.
Clearing Agencies – Systemic Safeguards: Clearing agencies – the clearinghouses that stand between buyers and sellers to settle trades – are vital to market stability, so the SEC will conduct annual examinations of those deemed systemically important. The focus is on risk management and operational resilience. Examiners will look at whether clearing agencies have robust frameworks to handle financial stress (think of extreme volatility or a member defaulting), including rigorous liquidity stress tests and backup plans if something goes wrong. For compliance officers at clearing firms, this is a reminder to review your disaster recovery drills, collateral policies, and capital reserves. The SEC wants to be confident that if the market hits a sudden shock, the plumbing of the financial system (clearing and settlement) can withstand the pressure without failing.
After the 2024 Election: Will Priorities Shift?
Core Themes Remain Consistent: Despite changes in political leadership, many of the SEC’s examination themes have a degree of continuity that transcends elections. In fact, the 2025 priorities largely carry on the SEC’s recent focus areas, suggesting that issues like fiduciary duty, conflicts of interest, and market integrity are considered important no matter which party is in charge. Notably, the heightened scrutiny of private fund advisers is expected to continue unabated regardless of the election outcome. For compliance professionals, this means you shouldn’t bet on a wholesale reprieve from these focus areas – the fundamental investor protections and risk management practices highlighted in the priorities are here to stay in the near term.
Potential Shifts in Emphasis: That said, a new administration can bring a different tone at the top. There is speculation (and some hope in industry circles) that a more business-friendly leadership at the SEC might rebalance priorities toward facilitating capital formation alongside investor protection. In practical terms, this could mean a somewhat lighter touch on enforcement – for example, observers predict that the SEC’s enforcement approach may become less aggressive, with fewer blockbuster corporate penalties and a dialled-back stance on certain contentious legal theories. High-profile rulemaking initiatives from the prior Commission (such as expansive climate disclosure rules) might be slowed, revisited, or even rolled back under new leadership. Compliance executives should stay tuned: a shift in priorities could change which issues get the most attention (for instance, a greater emphasis on capital-raising processes and less on technical rule violations).
Near-Term vs. Long-Term Changes: It’s important to distinguish immediate priorities from longer-term regulatory shifts. The Division of Examinations operates with a lot of career staff and established processes, so the published 2025 exam priorities are likely to guide examiners for the time being, even as new SEC Commissioners or a new Chair come on board. In other words, don’t expect an overnight overhaul. Many experts anticipate that while ongoing cases and exam focus areas will continue moving forward, some initiatives might be quietly deprioritized or adjusted over time by new SEC leadership.
For the next year or so, busy compliance officers should continue to hunker down on the priorities as stated – ensuring your firm is meeting fiduciary duties, shoring up compliance programs, minding broker sales practices, watching private fund conflicts, and fortifying market systems. Any strategic pivots in regulatory policy will likely roll out gradually, giving firms time to adapt.
The SEC’s 2025 examination priorities provide a clear roadmap of where examiners will be spending their time – and where firms should direct their compliance efforts. From advisers double-checking that they truly put clients first, to brokers making sure their recommendations and disclosures can pass muster, to infrastructure players bolstering their risk defences, the themes all point to a common goal: maintaining trust and resilience in the financial markets. While the political winds following 2024 may adjust the sails a bit, the fundamental course remains steady. For compliance professionals and RegTech leaders, the best approach is to embrace these priorities as enduring best practices. In short, keep doing right by your clients, document everything, and stay agile – that’s a message that resonates in any administration.
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