2027 SEC Exam Priorities for Investment Advisers & Investment Funds Focus on Economic Conflicts of Interest, Retailization, Compliance Programs & Emerging Technologies

Find a lawyer Our capabilities Your career

Nov 3 2026

Introduction

On October 23, 2026, the SEC’s Division of Exams released its Exam Priorities for Fiscal Year 2027. The Division publishes its exam priorities annually to highlight certain issues that SEC exam staff has identified as potential risks and/or issues on which it expects to focus during its upcoming exams of regulated entities. The 2027 Exam Priorities for investment advisers and investment funds generally refine and build on topics from last year’s priorities and other SEC initiatives, rather than reflecting substantial changes.

2027 Exam Priorities and Exam Preparation for Investment Advisers and Investment Funds

Below is an overview of the key 2027 Exam Priorities for investment advisers and investment funds, and how they fit within the SEC’s overall regulatory agenda. This summary also discusses the implications of the 2027 Exam Priorities for investment advisers and investment funds, and outlines the steps that they can take to enhance their compliance functions, manage regulatory risks, and prepare for an SEC exam.

Fiduciary Standards of Conduct: The 2027 Exam Priorities identify as an area of focus whether investment advisers are satisfying their fiduciary standards of conduct. Investment advisers’ duties of care and loyalty are a recurring SEC exam priority.
Duty of Care and Reasonable Diligence: One aspect of the fiduciary duties explicitly mentioned in the 2027 Exam Priorities but not in the prior year is whether an investment adviser has “conducted reasonable due diligence into products or services recommended to clients.” Notably, a September 2026 settled SEC enforcement action, Hatteras Investment Partners, alleged that a registered investment adviser to several registered funds breached its fiduciary duty by failing to conduct adequate due diligence of certain investments and failing to address red flags that were raised concerning these investments. This action alleged a violation of Section 206(2) of the Advisers Act but did not allege that the investment adviser had a conflict of interest with respect to the transaction. The express reference to due diligence in the 2027 Exam Priorities, together with the Hatteras settlement, illustrates the potential intersection between examination priorities and enforcement risk. To help satisfy their duty of care, investment advisers should establish policies and procedures to conduct due diligence of potential investments, follow-up on red flags, and document their diligence activities.
Valuation: The 2027 Exam Priorities’ discussion of fiduciary standards of conduct states that investment advisers should assess the reasonableness of their valuation processes and methodologies. Valuation has been an exam priority in prior years and will continue to be a priority as investments in private assets, which are illiquid and do not have measurable market inputs, grow in volume and in usage by certain registered investment companies (“RICs”) and business development companies (“BDCs”) as well as by private funds. In September 2026, the SEC’s Director of the Division of Investment Management and its Chief Accountant issued a Statement on Fair Value Measurement and Disclosure Considerations for Private Assets, which discusses the importance of robust policies and procedures for exercising judgment related to valuation; identifying and periodically reassessing valuation inputs, models, and assumptions; and providing material disclosure that is not boilerplate. Because valuation is often a crucial component of an investment advisers’ operations and obligations, investment advisers and investment funds should regularly review their valuation practices, disclosures, and documentation, using the Statement on Fair Value as a guide.
Economic conflicts of interest: Conflicts of interest are a recurring exam priority, and an investment adviser’s management and disclosure of conflicts is fundamental to its fiduciary obligations. The 2027 Exam Priorities state that the Division of Exams will focus on reviewing investment advisers’ economic conflicts of interest that may affect the impartiality of their advice in certain areas, including fee and expense calculations. Moreover, the Division of Exams recently issued a Risk Alert discussing investment advisers’ practices related to economic conflicts of interest. To be prepared for an exam, and to meet their fiduciary duty of care, investment advisers should consider the following with respect to economic conflicts of interest. First, efforts to manage conflicts of interest need to be tailored to an investment adviser’s specific activities. Thus, an investment adviser should identify its specific business lines as well as the sources and structures of its economic benefits, such as management fees and performance fees, and assess how these revenue sources could influence its investment decisions and services for clients, including but not limited to investment decisions and allocation of investment opportunities. Second, to effectively mitigate conflicts of interest, disclosure in an investment adviser’s Form ADV part 2 and elsewhere must provide sufficient information for investors to understand the nature and extent of the potential conflict. Third, to manage conflicts of interest related to the calculation and charging of advisory fees, investment advisers should implement robust and recurring processes to monitor all fees charged and confirm fee calculations and that fee offset arrangements are being followed.
Private Funds: The 2027 Exam Priorities state that exam activities related to private fund advisers will assess investment-related disclosures of risks for consistency with fiduciary standards, and whether compliance policies, procedures, and controls address both fund-level and investment-level risks. The 2027 Exam Priorities reference several areas that are recurring focus areas for examinations of private fund advisers and that present potential economic conflicts of interest, including investment allocation, use of debt and fund-level lines of credit, affiliated service providers, and fee and expense calculations. As discussed above regarding economic conflicts of interest, private fund advisers should periodically review their disclosures and compliance monitoring related to these matters.
Retailization of Private Capital: Consistent with last year’s exam priorities, and reflecting market developments, the 2027 Exam Priorities reflect a continued focus on the retailization of private capital. Specifically, the 2027 Exam Priorities mention investments by RICs and BDCs in complex, less liquid, or alternative products such as loans provided by funds, investments in private companies through SPVs, and private credit. These products and practices present potential risks regarding valuation, liquidity and redemptions, conflicts of interest, and investment risk disclosure that are exam priorities for 2027 generally. In addition, many RICs, BDCs, and investment advisers investing in private capital rely on SEC exemptive orders for certain activities, such as co-investments; the 2027 Exam Priorities state that the SEC staff will review how these entities implement these orders, comply with the conditions that the orders impose, and document such compliance. RICs and BDCs that are invested in private capital and their investment advisers should review their practices, disclosures, and documentation in these areas to mitigate compliance risks and prepare for an SEC exam.
Investment Adviser Compliance Programs: Maintaining an effective compliance program is crucial for investment advisers, and the effectiveness of such programs is a common priority for exams of registered investment advisers. The 2027 Exam Priorities specifically reference compliance programs related to marketing, valuation, portfolio management, disclosure, and custody (which were also identified in last year’s priorities), and also emphasize compliance policies and procedures designed to address economic and other conflicts of interest. The 2027 Exam Priorities also state that examiners will typically analyze an investment adviser’s annual compliance review required by Rule 206(4)-7 under the Advisers Act, which builds on a September Risk Alert that discussed exam observations regarding these compliance reviews. The 2027 Exam Priorities and the Compliance Reviews Risk Alert provide useful substantive and procedural guidance for conducting effective compliance reviews, including that compliance reviews should be tailored to the investment advisers’ actual practices and risks, refined to reflect new business activities and other changes at the investment adviser, and address prior identified compliance deficiencies and findings. The Compliance Reviews Risk Alert encourages investment advisers to adopt and adhere to written policies and procedures for conducting annual compliance reviews, and to maintain documentation of testing, recommendations, and other activities conducted during their annual reviews. Investment advisers should assess whether their practices related to annual compliance reviews are consistent with the guidance in this Risk Alert and the 2027 Exam Priorities.
Timely and accurate filings: The 2027 Exam Priorities reiterate that examiners will assess whether investment advisers are making timely and accurate filings, including Schedules 13D and 13G, and Forms 13F and N-PX. The 2027 Exam Priorities specifically reference “advisers with activist engagement practices,” which can include but are not limited to investors that seek to influence the governance or activities of companies in which they invest, including related to environmental and social factors. However, these filing obligations – and SEC scrutiny thereof – is not limited to activist investors, as illustrated by a recently settled enforcement action against an SEC-registered investment adviser and broker-dealer alleging repeated failure to make Form 13F filings.
Broker-Dealer Read-Across: Certain changes to the 2027 broker-dealer priorities also may be relevant to dual registrants and affiliated businesses. Notably, higher-cost products and best execution, which appeared in the investment adviser priorities in 2026, are addressed under broker-dealers in 2027. For firms operating across the investment adviser/broker-dealer perimeter, this shift reinforces the importance of assessing recommendations, product costs, execution quality, compensation arrangements, conflicts of interest, and supervisory controls across the relevant businesses.
Information Security, Operational Resiliency, and Emerging Financial Technology: As with past years, cybersecurity, operational resiliency, and emerging technologies are identified as exam priorities for multiple registrants, including investment advisers and investment funds. While there is not a specific regulation for investment advisers or investment funds concerning these topics, they are relevant to numerous regulatory considerations and obligations, including fiduciary duties, compliance policies and procedures, and disclosure obligations, as well as Regulation S-P and Form PF current reports for entities subject to these regulations.
Cybersecurity and Regulation S-P:The 2027 Exam Priorities state that examiners will review firms’ policies and procedures regarding governance, data loss prevention, access controls, and responses for cyber-related incidents—which are also referenced in last year’s priorities—and identify the increased use of service providers and shared technologies and risk-management related to these areas. Risks and practices in these areas evolve rapidly, and investment advisers and investment funds should confirm that they implement dynamic and robust policies, procedures, monitoring, and testing, and dedicate sufficient personnel and resources to these areas. In addition, the deadline for compliance with amendments to Regulation S-P for relevant investment advisers and investment funds has passed, and SEC staff will likely continue to assess whether investment advisers and investment funds have adopted and are following policies and procedures to comply with these amendments.
Artificial Intelligence and Emerging Financial Technology: Investment advisers and investment funds continue to use artificial intelligence (“AI”) for investment analysis, trading functions, and back-office and compliance activities. The 2027 Exams Priorities will focus on policies and procedures related to such use, and also emphasize preparation for cyberattacks that are generated or enhanced by AI, such as phishing attacks that use voice and video deepfakes. The 2027 Exam Priorities also reference other emerging technologies, such as automated investment tools, trading algorithms, and alternative data sources. With respect to the use of AI and other emerging technologies, it is critical for investment advisers and investment funds to adopt and update policies and procedures, review the accuracy of disclosures, and confirm that the use of such technologies generates advice that is consistent with stated investment strategies. For investment advisers with broker-dealer affiliates, this review should also encompass the use of these technologies in trading, supervision, AML, and compliance with Regulation Best Interest.

Examination and Enforcement Read-Across

The 2027 Exam Priorities provide useful insight into areas in which compliance deficiencies may receive heightened regulatory scrutiny. Investment advisers and investment funds should therefore assess not only whether appropriate policies and procedures are in place, but also whether controls operate effectively in practice and whether identified deficiencies are appropriately escalated, remediated, and documented.

Exam Handbook and Registrant Dialogue with Examiners

Notably, the 2027 Exam Priorities reflect and discuss the Division of Exams’ objectives of facilitating dialogue with registrants subject to an examination and integrating the Division with other SEC Divisions and Offices, as well as other regulatory authorities. Furthermore, on October 1, the Division of Exams published The SEC Exam Handbook, which provides useful context regarding the typical process for conducting exams. This Handbook, the introduction of the 2027 Exam Priorities publication, and other Exams staff activities reflect efforts by the SEC and SEC staff to increase transparency and dialogue with respect to the exam process. These efforts present an opportunity for investment advisers and investment funds to provide context to examiners throughout the exam process, and to use interactions with examiners as opportunities to address concerns before findings are finalized. Specifically, investment advisers and investment funds should prepare for exam responses early, so they can clearly explain their business model, risks, controls, and compliance framework during the course of an exam and be better positioned to provide relevant context, address potential misunderstandings, and respond effectively to issues identified during the examination.

Conclusion

The 2027 Exam Priorities largely build on established areas of SEC focus, while sharpening the Division’s attention to economic conflicts, retailization of private capital, the effectiveness of compliance programs, and emerging technologies. Investment advisers and investment funds should use these priorities, together with relevant Risk Alerts, staff statements, and enforcement developments, to assess whether their policies, controls, disclosures, and documentation remain appropriately tailored to their businesses and evolving risks. Identifying and remediating potential weaknesses before an examination begins can help investment advisers and investment funds respond more effectively when SEC exam staff comes calling. To discuss preparation for an SEC exam or regulatory compliance considerations generally, please reach out to any of the authors listed here or any member of the Freshfields team.

To receive the latest insights on US legal developments, subscribe to the Freshfields A Fresh Take Blog.

Authors

Washington, DC

Nov 3 2026

Introduction

2027 Exam Priorities and Exam Preparation for Investment Advisers and Investment Funds

Fiduciary Standards of Conduct: The 2027 Exam Priorities identify as an area of focus whether investment advisers are satisfying their fiduciary standards of conduct. Investment advisers’ duties of care and loyalty are a recurring SEC exam priority.
Duty of Care and Reasonable Diligence: One aspect of the fiduciary duties explicitly mentioned in the 2027 Exam Priorities but not in the prior year is whether an investment adviser has “conducted reasonable due diligence into products or services recommended to clients.” Notably, a September 2026 settled SEC enforcement action, Hatteras Investment Partners, alleged that a registered investment adviser to several registered funds breached its fiduciary duty by failing to conduct adequate due diligence of certain investments and failing to address red flags that were raised concerning these investments. This action alleged a violation of Section 206(2) of the Advisers Act but did not allege that the investment adviser had a conflict of interest with respect to the transaction. The express reference to due diligence in the 2027 Exam Priorities, together with the Hatteras settlement, illustrates the potential intersection between examination priorities and enforcement risk. To help satisfy their duty of care, investment advisers should establish policies and procedures to conduct due diligence of potential investments, follow-up on red flags, and document their diligence activities.
Valuation: The 2027 Exam Priorities’ discussion of fiduciary standards of conduct states that investment advisers should assess the reasonableness of their valuation processes and methodologies. Valuation has been an exam priority in prior years and will continue to be a priority as investments in private assets, which are illiquid and do not have measurable market inputs, grow in volume and in usage by certain registered investment companies (“RICs”) and business development companies (“BDCs”) as well as by private funds. In September 2026, the SEC’s Director of the Division of Investment Management and its Chief Accountant issued a Statement on Fair Value Measurement and Disclosure Considerations for Private Assets, which discusses the importance of robust policies and procedures for exercising judgment related to valuation; identifying and periodically reassessing valuation inputs, models, and assumptions; and providing material disclosure that is not boilerplate. Because valuation is often a crucial component of an investment advisers’ operations and obligations, investment advisers and investment funds should regularly review their valuation practices, disclosures, and documentation, using the Statement on Fair Value as a guide.
Economic conflicts of interest: Conflicts of interest are a recurring exam priority, and an investment adviser’s management and disclosure of conflicts is fundamental to its fiduciary obligations. The 2027 Exam Priorities state that the Division of Exams will focus on reviewing investment advisers’ economic conflicts of interest that may affect the impartiality of their advice in certain areas, including fee and expense calculations. Moreover, the Division of Exams recently issued a Risk Alert discussing investment advisers’ practices related to economic conflicts of interest. To be prepared for an exam, and to meet their fiduciary duty of care, investment advisers should consider the following with respect to economic conflicts of interest. First, efforts to manage conflicts of interest need to be tailored to an investment adviser’s specific activities. Thus, an investment adviser should identify its specific business lines as well as the sources and structures of its economic benefits, such as management fees and performance fees, and assess how these revenue sources could influence its investment decisions and services for clients, including but not limited to investment decisions and allocation of investment opportunities. Second, to effectively mitigate conflicts of interest, disclosure in an investment adviser’s Form ADV part 2 and elsewhere must provide sufficient information for investors to understand the nature and extent of the potential conflict. Third, to manage conflicts of interest related to the calculation and charging of advisory fees, investment advisers should implement robust and recurring processes to monitor all fees charged and confirm fee calculations and that fee offset arrangements are being followed.
Private Funds: The 2027 Exam Priorities state that exam activities related to private fund advisers will assess investment-related disclosures of risks for consistency with fiduciary standards, and whether compliance policies, procedures, and controls address both fund-level and investment-level risks. The 2027 Exam Priorities reference several areas that are recurring focus areas for examinations of private fund advisers and that present potential economic conflicts of interest, including investment allocation, use of debt and fund-level lines of credit, affiliated service providers, and fee and expense calculations. As discussed above regarding economic conflicts of interest, private fund advisers should periodically review their disclosures and compliance monitoring related to these matters.
Retailization of Private Capital: Consistent with last year’s exam priorities, and reflecting market developments, the 2027 Exam Priorities reflect a continued focus on the retailization of private capital. Specifically, the 2027 Exam Priorities mention investments by RICs and BDCs in complex, less liquid, or alternative products such as loans provided by funds, investments in private companies through SPVs, and private credit. These products and practices present potential risks regarding valuation, liquidity and redemptions, conflicts of interest, and investment risk disclosure that are exam priorities for 2027 generally. In addition, many RICs, BDCs, and investment advisers investing in private capital rely on SEC exemptive orders for certain activities, such as co-investments; the 2027 Exam Priorities state that the SEC staff will review how these entities implement these orders, comply with the conditions that the orders impose, and document such compliance. RICs and BDCs that are invested in private capital and their investment advisers should review their practices, disclosures, and documentation in these areas to mitigate compliance risks and prepare for an SEC exam.
Investment Adviser Compliance Programs: Maintaining an effective compliance program is crucial for investment advisers, and the effectiveness of such programs is a common priority for exams of registered investment advisers. The 2027 Exam Priorities specifically reference compliance programs related to marketing, valuation, portfolio management, disclosure, and custody (which were also identified in last year’s priorities), and also emphasize compliance policies and procedures designed to address economic and other conflicts of interest. The 2027 Exam Priorities also state that examiners will typically analyze an investment adviser’s annual compliance review required by Rule 206(4)-7 under the Advisers Act, which builds on a September Risk Alert that discussed exam observations regarding these compliance reviews. The 2027 Exam Priorities and the Compliance Reviews Risk Alert provide useful substantive and procedural guidance for conducting effective compliance reviews, including that compliance reviews should be tailored to the investment advisers’ actual practices and risks, refined to reflect new business activities and other changes at the investment adviser, and address prior identified compliance deficiencies and findings. The Compliance Reviews Risk Alert encourages investment advisers to adopt and adhere to written policies and procedures for conducting annual compliance reviews, and to maintain documentation of testing, recommendations, and other activities conducted during their annual reviews. Investment advisers should assess whether their practices related to annual compliance reviews are consistent with the guidance in this Risk Alert and the 2027 Exam Priorities.
Timely and accurate filings: The 2027 Exam Priorities reiterate that examiners will assess whether investment advisers are making timely and accurate filings, including Schedules 13D and 13G, and Forms 13F and N-PX. The 2027 Exam Priorities specifically reference “advisers with activist engagement practices,” which can include but are not limited to investors that seek to influence the governance or activities of companies in which they invest, including related to environmental and social factors. However, these filing obligations – and SEC scrutiny thereof – is not limited to activist investors, as illustrated by a recently settled enforcement action against an SEC-registered investment adviser and broker-dealer alleging repeated failure to make Form 13F filings.
Broker-Dealer Read-Across: Certain changes to the 2027 broker-dealer priorities also may be relevant to dual registrants and affiliated businesses. Notably, higher-cost products and best execution, which appeared in the investment adviser priorities in 2026, are addressed under broker-dealers in 2027. For firms operating across the investment adviser/broker-dealer perimeter, this shift reinforces the importance of assessing recommendations, product costs, execution quality, compensation arrangements, conflicts of interest, and supervisory controls across the relevant businesses.
Information Security, Operational Resiliency, and Emerging Financial Technology: As with past years, cybersecurity, operational resiliency, and emerging technologies are identified as exam priorities for multiple registrants, including investment advisers and investment funds. While there is not a specific regulation for investment advisers or investment funds concerning these topics, they are relevant to numerous regulatory considerations and obligations, including fiduciary duties, compliance policies and procedures, and disclosure obligations, as well as Regulation S-P and Form PF current reports for entities subject to these regulations.
Cybersecurity and Regulation S-P:The 2027 Exam Priorities state that examiners will review firms’ policies and procedures regarding governance, data loss prevention, access controls, and responses for cyber-related incidents—which are also referenced in last year’s priorities—and identify the increased use of service providers and shared technologies and risk-management related to these areas. Risks and practices in these areas evolve rapidly, and investment advisers and investment funds should confirm that they implement dynamic and robust policies, procedures, monitoring, and testing, and dedicate sufficient personnel and resources to these areas. In addition, the deadline for compliance with amendments to Regulation S-P for relevant investment advisers and investment funds has passed, and SEC staff will likely continue to assess whether investment advisers and investment funds have adopted and are following policies and procedures to comply with these amendments.
Artificial Intelligence and Emerging Financial Technology: Investment advisers and investment funds continue to use artificial intelligence (“AI”) for investment analysis, trading functions, and back-office and compliance activities. The 2027 Exams Priorities will focus on policies and procedures related to such use, and also emphasize preparation for cyberattacks that are generated or enhanced by AI, such as phishing attacks that use voice and video deepfakes. The 2027 Exam Priorities also reference other emerging technologies, such as automated investment tools, trading algorithms, and alternative data sources. With respect to the use of AI and other emerging technologies, it is critical for investment advisers and investment funds to adopt and update policies and procedures, review the accuracy of disclosures, and confirm that the use of such technologies generates advice that is consistent with stated investment strategies. For investment advisers with broker-dealer affiliates, this review should also encompass the use of these technologies in trading, supervision, AML, and compliance with Regulation Best Interest.