SERC’ling Up is your resource for staying ahead in today’s fast-evolving financial landscape. This newsletter delivers perspectives on the latest enforcement trends, regulatory updates and high-stakes developments affecting broker-dealers, investment advisers, financial institutions and corporate clients. Drawing on the firm’s blend of government and industry experience, SERC’ling Up provides actionable intelligence to help clients anticipate risks, respond effectively to scrutiny and remain resilient in a shifting regulatory environment.
The SEC’s Division of Examinations released its Fiscal Year 2026 Examination Priorities on Nov. 17, 2025, outlining where the Division intends to focus its resources in the coming year. The 2026 Priorities, which the SEC emphasized should serve as a basis for constructive dialogue, build upon the framework set out in the Fiscal Year 2025 Examination Priorities.
Instructive is Chair Paul Atkins’ comment in releasing the 2026 Priorities that “examinations are an important component to accomplishing the agency’s mission but should not be a ‘gotcha’ exercise.” Chair Atkins is committed to reshaping the agency’s approach to regulation and enforcement, and his statement aligns with his pledge to be open and transparent with the industry. The message seems clear: Exams are not a prelude to enforcement.
Although it is difficult to predict the rapidly evolving business, technological and regulatory landscape, the SEC’s Examination Priorities are a good resource to help financial firms remain vigilant and thoughtful when it comes to assessing compliance with the federal securities laws. The updated priorities reflect a clear expectation that firms maintain agile, well-embedded compliance environments capable of adapting to new products, technologies and regulatory developments.
Key themes include: (1) services affecting retail investors, in particular older investors and those saving for retirement; (2) firms that have recently undergone major changes, including new business lines, consolidations and acquisitions, and significant new products or clients; and (3) cybersecurity, operational resilience and vendor oversight. The Division reiterated that its priorities remain grounded in its “Four Pillars” — promoting compliance, preventing fraud, informing policy, and monitoring risk. It also emphasized that the published priorities represent high-risk areas as opposed to an exhaustive list of examination topics.
Broker-Dealers
The 2026 Priorities focus on broker-dealer examinations, particularly on retail sales practices and a firm’s obligations to clients.
That focus is most pronounced in the Division’s continued emphasis on reviewing for compliance with Reg BI, specifically in the context of product and account-type recommendations. This is especially true when recommendations involve limited product menus or compensation structures that create conflicts of interest. Examiners will also assess how firms satisfy their Care Obligation, including whether customer investment profiles and product characteristics are meaningfully integrated into recommendations, as well as whether firms appropriately consider reasonably available alternatives. In examining these topics, the Division plans to evaluate recommendations associated with the following products:
- Variable annuities and registered index-linked annuities
- ETFs investing in illiquid assets
- Municipal products
- Private placements
- Structured products
- Other illiquid or high-fee investments
- Recommendations to move investors into substantially similar products
- Recommendations to open margin, options or self-directed IRA accounts
The Division will also continue to scrutinize financial responsibility requirements, such as the net capital rule (Rule 15c3-1) and the customer protection rule (Rule 15c3-3). The Division explicitly called out risks stemming from cash sweep programs and prime brokerage activities. Firms that engage in these activities should evaluate their compliance programs to verify that they adequately account for risks related to these business practices, including concentration, liquidity, and counterparty risks.
The 2026 Priorities also continue the Division’s focus from 2025 on trading practices. In the 2026 fiscal year, the Division will focus on extended-hours trading, the rate-reset process for variable rate demand obligations and disclosure obligations under Rule 605. With respect to Regulation SHO, the Division will continue to assess whether firms are properly relying on the bona fide market-making exception, including the evaluation of quoting behavior relative to the inside market.
Alternative trading systems will also receive attention regarding written safeguards for subscriber confidentiality under Regulation ATS, alignment with Form ATS-N disclosures and risk-control frameworks.
Firms registered as both broker-dealers and investment advisers should expect examiners to focus on conflicts arising from differing compensation structures across brokerage and advisory channels. Account allocation and account-type selection practices, including decisions to rollover employer plans or move brokerage clients into advisory or wrap-fee programs, will also be areas of focus.
Investment Advisers
The 2026 Priorities reaffirm the SEC’s long-standing focus on investment advisers’ fiduciary obligations, particularly regarding retail investors. The Division will review advisers’ investment advice and disclosures for consistency with their fiduciary duties, with a focus on the following products and clients:
- Alternative investments, including private credit
- Complex investment products
- High-cost investment products
- Products sensitive to market volatility
- Separately managed accounts
- Newly launched private funds
Given recent complications in the private credit market, advisers should review their existing disclosures to verify that they accurately depict the conflicts and risks present with alternative investments and complex products.
Across the discussion of both fiduciary obligations and compliance programs, the Division emphasized a focus on advisers with new business lines, new business models or other substantial changes to their business. Advisers should ensure that they address all potential conflicts of interest that arise with major changes to their business models or client bases.
The Division highlighted similar concerns with investment companies, where fees and expenses, governance practices, service provider oversight, and the valuation and management of complex or illiquid strategies remain critical themes.
Operations and Information Security
The 2026 Priorities also continue to focus on governance and systems integrity across market participants, and they place increased attention on firms’ operational resiliency, information security and supervision of third-party vendors. The 2026 Priorities emphasize that outsourcing arrangements and third-party access to customer accounts present heightened risks when firms rely on external providers for critical operational functions, including recordkeeping, data migration, account-access tools and financial reporting processes. The Division intends to evaluate how firms oversee these relationships, the sufficiency of their due diligence and ongoing monitoring, and whether they maintain effective controls to safeguard sensitive customer information.
The 2026 Priorities specifically call out the implementation of Regulation S-P, which comes into effect on Dec. 3, 2025, and Regulation SCI. The Division will focus on firms’ development of incident response programs under both regulations. Under Regulation SCI, the Division will focus specifically on management of third-party vendor risk. Firms should ensure that they are fully prepared to demonstrate compliance with the new regulation in the coming year.
The Division also highlighted change-management processes as a particular vulnerability, for example, when firms introduce new technologies, integrate systems following mergers or acquisitions, or deploy new automated tools without adequate testing or documentation. In addition, the 2026 Priorities reaffirm the importance of cybersecurity preparedness, business continuity planning and incident-response capabilities, with examiners expected to review whether firms can detect, contain and remediate disruptions while maintaining core operations.
FinTech and Digital Assets
The 2026 Priorities are a notable shift from last year’s with respect to emerging financial technology and digital assets. While the 2025 examination priorities included crypto assets as a standalone focus area, the 2026 Priorities do not specifically address cryptocurrency. The 2026 Priorities reiterate the SEC’s ongoing scrutiny of algorithmic tools, AI-driven models and other forms of automated advice. Firms employing these technologies should expect examiners to evaluate governance frameworks and supervisory practices applicable to these tools.
Next Steps
Registered entities across the securities industry may wish to conduct targeted gap assessments that benchmark existing controls against the areas highlighted in the 2026 document, update their written supervisory procedures, enhance vendor oversight frameworks, and reinforce training efforts for personnel involved in retail communications, trading activity, cybersecurity and compliance operations. Registrants that have never been examined should consider undertaking pre-examination readiness exercises to ensure that key materials, processes and supervisory structures are defensible if they are selected for review.
For questions about this alert, contact the authors or your McGuireWoods contact.
McGuireWoods’ Securities Enforcement & Regulatory Counseling (SERC) Practice Group is a national leader in securities enforcement defense and broker-dealer and investment adviser regulatory counseling. Anchored by former SEC and FINRA attorneys from enforcement and trading and markets as well as prominent federal prosecutors, the team manages complex securities investigations at every stage — from informal inquiries and routine exams through investigations, litigation and appeals — all while staying at the forefront of developing issues confronting the securities industry.
Contacts
John V. Ayanian
Elizabeth J. Hogan
Todd M. Beaton Jr.
Louis D. Greenstein
David L. Hirsch
E. Andrew Southerling
Molly M. White
Chelsea Smith Press
Anna K. Bintinger
Mita Ramani