SEC’s 2025 Examination Priorities for Investment Advisors

The SEC’s Division of Examinations released its highly anticipated 2025 Examination Priorities on Oct. 21, 2024, offering a detailed roadmap of its regulatory focus for the upcoming fiscal year (Oct. 1, 2024 – Sep. 30, 2025). This year, the spotlight intensifies on critical areas such as cybersecurity, compliance within private funds, and the innovative use of financial technology such as artificial intelligence (AI), all aimed at compelling registered entities to cultivate and maintain compliance frameworks that are as sophisticated and robust as the operations they oversee.

The following overview unveils critical insights into high-risk areas and essential focuses for upcoming investment adviser examinations. This proactive approach highlights the agency’s commitment to investor protection and market stability in the face of evolving challenges.

Shaping the Regulatory Landscape: SEC’s Approach

March 2025 marks the 30th anniversary of the SEC’s Division of Exams, highlighting its adaptation to the securities markets’ evolution from manual to high-speed, digital processes. Initially aligning with the rise of internet trading, the SEC has continually evolved its methods to address the challenges of sophisticated AI-driven strategies and significant cybersecurity concerns. The adaptation extends to its examination framework, which prioritizes emerging risks like blockchain and crypto assets alongside traditional compliance areas. By integrating advanced data analytics, the SEC’s risk-based examination program strategically targets firms and sectors based on industry trends, investor complaints, and referrals. This approach allows the SEC to efficiently identify and focus on the areas posing the greatest risks to investors and market integrity.

2025 Key Examination Areas for Investment Advisors

As investment advisors prepare to navigate the SEC’s 2025 examination priorities, it is crucial to understand how these areas of focus will shape compliance strategies and operational practices. The following examination areas explore the specific challenges and strategies that will define successful compliance in the coming year.

Cybersecurity and Operational Resilience

As cyber threats grow in sophistication, the SEC’s scrutiny of cybersecurity programs intensifies. Exams will assess whether RIAs and broker-dealers have robust policies and controls to protect investor information and ensure business continuity. Specifically, firms should expect questions about governance and oversight of cybersecurity risks, incident response and recovery plans, third-party vendor risk management, and training and testing protocols for employees. Recent enforcement actions demonstrate the SEC’s commitment to penalizing firms that fail to address vulnerabilities, making it imperative for firms to prioritize this area.

Private Fund Advisors

The SEC is intensifying its scrutiny of advisers to private funds—a significant portion of the registered investment adviser demographic—by focusing on multiple critical areas. These examinations will assess the accuracy of advisers’ fiduciary duty disclosures during market volatility and interest rate changes, along with a review of private fund fees, expense allocations, illiquid asset valuations, and post-commitment fee management.

Additionally, the SEC will rigorously assess the disclosure of conflicts of interest and risks, examining advisers’ policies on managing such disclosures, specifically focusing on fund-level credit lines, adviser-led secondary transactions, and interactions with affiliated funds and service providers. Compliance with recent SEC rule changes will also be a focal point to ensure advisers have implemented robust procedures that comply with these updated standards.

Adherence to Fiduciary Standards of Conduct

The SEC emphasizes the critical fiduciary duties of investment advisers, requiring them to prioritize client interests and manage conflicts transparently. The focus is on ensuring the suitability of recommendations for high-cost and unconventional products, and assets sensitive to market shifts like interest rates. Special scrutiny will be applied to dual registrants and advisers with affiliated broker-dealers, assessing the impartiality of advice and clarity of disclosures, particularly around fee structures that could bias their recommendations.

RIA Compliance Programs

The SEC will focus on whether advisers have established robust, effective compliance policies and procedures to prevent violations of the Investment Advisers Act. The focus extends to various operational aspects such as marketing, trading practices, portfolio management, and fee structures. The SEC emphasizes ensuring these measures genuinely protect client interests and are fully transparent, particularly when adapting to new technologies or business models.

Anti–Money Laundering (AML) Compliance

AML programs tailored to a firm’s business model are critical for preventing financial crime. The SEC will evaluate Customer due diligence (CDD) practices, suspicious activity reporting (SARs) processes, and independent testing of AML programs. Given FinCEN’s recent rule imposing AML requirements on private fund managers, the SEC’s examinations will likely expand in scope to address this sector.

Privacy Compliance

The SEC is focusing on compliance with Regulations S-ID and S-P, evaluating firms’ policies and controls concerning the safeguarding of customer information and identity theft prevention. The examinations will also review operational risks and technological vulnerabilities that affect data security. Additionally, as amendments to Regulation S-P near, the SEC will assess firms’ readiness to execute incident response programs to handle unauthorized access to customer information effectively.

Emerging Trends and Evolving Risks

The SEC’s 2025 Examination Priorities demonstrate a proactive and adaptive response to the rapidly evolving financial landscape. A significant focus is also on the regulation of digital assets, as the SEC aims to navigate the complexities of blockchain technologies and digital currencies to ensure robust investor protection.

Another key area is the oversight of third-party service providers, where the SEC intends to scrutinize the adequacy of firms’ due diligence processes and monitoring mechanisms. The SEC also emphasizes proper recordkeeping for business communications. This is especially important for messages sent through unauthorized platforms, as recent enforcement actions have resulted in large fines. This comprehensive approach underlines the SEC’s commitment to addressing emerging risks and ensuring the integrity of the financial markets.

The Bottom Line

The SEC’s 2025 Examination Priorities has shown it will actively enforce compliance and protect investors in 2025. Investment advisers should review these priorities now and update their compliance programs accordingly.

This proactive approach will ensure ongoing readiness and effectiveness in adapting to the evolving regulatory landscape, keeping firms aligned with SEC expectations and safeguarding market integrity. Schedule a discovery call to learn more about how our business advisors can help you.