On Oct. 23, 2026, the SEC’s Division of Examinations announced its fiscal year 2027 examination priorities. The Division covers more than 34,000 registrants, including investment advisers, investment companies and broker-dealers. The document is a statement of the views of Division staff, not a Commission rule. For a private fund adviser or a mid-size adviser, though, the useful way to read it is not as policy. It reads as a draft document request list. The Division has written down what it intends to ask for and who it is likely to ask first.
The fund-level request list
When examining advisers to private funds, the Division says it will review investment-related risk disclosures against fiduciary standards and whether compliance policies, procedures and controls address both fund-level and investment-level risks. The examples it gives, in the Division’s words, are disclosures on “certain investments and allocations, use of debt and fund-level lines of credit, use of affiliated service providers, and the accuracy of fee and expense calculations at both the fund and investment levels.”
Translate each of those into the record a firm would have to produce on short notice. Fee and expense calculations at fund and investment level means the fee terms in the governing documents, the calculation workpapers, the allocation method for shared expenses, and a reconciliation between what the documents permit and what was charged. Fund-level lines of credit means the facility agreement, the disclosure made to investors, and a record of how borrowing affected reported performance. Affiliated service providers means the list of affiliates paid by the funds, the disclosure of each arrangement, and evidence that pricing was reviewed against the market. If one of those records does not exist today, it is cheaper to build it now than during an examination.
Conflicts, products and valuation
The Division will prioritize advisers’ fiduciary obligations relating to economic conflicts of interest, naming fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, deposits and withdrawals. That priority follows a staff risk alert this year on adviser obligations related to economic conflicts of interest. The sequence suggests examiners will arrive with a checklist already tested in the field. Expect the request to cover the conflicts inventory, the disclosure that corresponds to each item, and the compliance testing that shows disclosure matches practice.
The Division will also prioritize advisers that recommend products that are hard to trade or illiquid, and it names loans provided by private funds or business development companies and investments in private companies through special purpose vehicles. Examinations will review whether advisers have assessed the reasonableness of their valuation processes and methodologies. For a private credit or venture manager, that points to the valuation policy, the committee minutes, any third-party valuation reports, and the record of how stale or disputed marks were resolved.
Two further items belong on the list. The Division will focus on advisers using third parties to access clients’ accounts, where existing controls may be insufficient to protect client assets and data. And examinations will typically analyze the adviser’s annual compliance review. The Division will review components of the compliance program covering marketing, valuation, trading, portfolio management, disclosure and filings, and custody, as appropriate to each examination. In our view the annual review is often the first document examiners read and the one most often found thin: a memo that lists policies rather than testing them.
Who gets picked
The Division will continue to prioritize examinations of advisers that have never been examined, with particular emphasis on recently registered advisers. It will also focus on compliance practices where advisers have changed business models, started advising different types of clients, begun advising on new asset classes or added new services. And it will prioritize advisers that have grown through mergers, acquisitions or other means, or that operate from multiple geographically dispersed branch offices.
If a firm registered recently, launched a new strategy, bought a competitor or opened a second office, it should assume it fits the Division’s own description of who gets examined.
Selection for the fiscal year is likely already under way. A firm in one of those groups should plan on that basis. The examination will likely look for evidence that the compliance program was adapted after the change, not merely that the change happened. For advisers with activist engagement practices, the Division will also review the timeliness and accuracy of filings on Schedules 13D and 13G and Forms 13F, 13H, 3, 4, 5 and N-PX.
The shift to “super intelligence”
The document uses the term “super intelligence”, abbreviated SI, for the tools registrants are incorporating into their businesses. The leadership message says the Division is intensifying its efforts to understand how those technologies influence outcomes. In our reading, the change in label does not change the test: the obligations the Division points to are the existing ones, and they apply whatever the tool is called. The Division will focus on how registrants assess and prepare for SI-related cyberattacks, such as SI-generated phishing and synthetic or deepfake voice and video used for social engineering. Where firms use automated investment tools or algorithms, reviews will generally assess whether algorithms lead to advice or recommendations consistent with investors’ investment profiles or stated strategies.
For a fund manager, that means an inventory of where generative tools touch research, drafting, client communications or compliance monitoring, and a record of who approved each use and how its output is checked.
What still applies
Nothing in the priorities changes an adviser’s obligations. The Division said the priorities are not an exhaustive list of what examiners will review, and it expects firms to maintain strong, risk-based compliance programs tailored to their businesses. Cybersecurity examinations will continue to review governance practices, data loss prevention, access controls, account management, and response and recovery protocols for cyber incidents, including ransomware. Under amended Regulation S-P, staff will evaluate response program policies and procedures for unauthorized access to or use of customer information, including customer notification procedures and oversight of service providers. The leadership message also points to a new SEC Exam Handbook, published this month, that replaces the previous examination brochure and describes what to expect during an examination. Read it alongside the priorities: one describes the process, the other the content.
What firms should do
- Build the fund-level fee and expense file now. Pull the governing documents, the calculation workpapers and the expense allocation method into one place, and reconcile them. Do the same for any fund-level credit facility and every affiliated service provider arrangement.
- Reconcile the conflicts inventory to disclosures. For each item the Division names, from fee rebates to cash management, confirm there is a disclosure and a test that shows practice matches it.
- Re-read the annual compliance review as an examiner would. If it lists policies without describing what was tested and what was found, redo it before the request arrives.
- If the firm changed in the past year, document the response. A new strategy, a new client type, an acquisition or a new office should each have a memo showing how the compliance program was adjusted and which new conflicts were identified.
- Inventory technology use. Record where generative tools are used, who approved them, and how output is checked, and confirm the incident response plan addresses synthetic voice, video and phishing.
- Run a mock request. Taft’s ExamReady assembles a firm’s records against the current priorities and identifies the gaps before the request letter arrives. Our guide to audit readiness best practices for financial firms sets out how to organize the file so it can be produced quickly.
Taft helps advisers prepare for examinations; it does not provide legal advice. Where a disclosure or a fee practice raises a legal question, firms should take counsel’s view before the examiners ask.
Sources
- SEC Announces Fiscal Year 2027 Examination Priorities, U.S. Securities and Exchange Commission
- Examination Priorities, U.S. Securities and Exchange Commission
Taft does not provide legal advice. Content is for informational purposes only and subject to regulatory guidance.