Advisor adherence to fiduciary standards of conduct and a heightened focus on Regulation Best Interest are among the main focus areas of the just-released 2025 examination priorities from the Securities and Exchange Commission’s Division of Examinations.
“Our 2025 examination priorities identify the key areas of potentially increased risks and related harm for investors.”
Keith Cassidy, SEC Division of Examinations
The Division publishes its examination priorities annually to inform investors and registrants of potential risks in the U.S. capital markets and to make them aware of the examination topics that the Division plans to focus on in the new fiscal year. This year’s examinations will prioritize perennial and emerging risk areas, such as fiduciary duty, standards of conduct, cybersecurity, and artificial intelligence.
“The Division of Examinations 2025 priorities enhance trust in our ever-evolving markets,” said SEC Chair Gary Gensler. “In examining for compliance with our time-tested rules, the Division plays a critical role in protecting investors and facilitating capital formation. Working with registrants to understand the rules helps ensure that markets work for investors and issuers alike.”
The Division examines SEC-registered investment advisors, investment companies, broker-dealers, clearing agencies, and self-regulatory organizations, among others, for compliance with federal securities laws. The Division prioritizes examinations of the practices, products, and services that were found, through a risk-based assessment, to present a heightened risk to investors or the integrity of the U.S. capital markets.
Fiduciary duty and Reg BI
One of the main focuses of the SEC’s 2025 fiscal year examination priorities will be advisors’ adherence to fiduciary duty, specifically in relation to the products and strategies recommended to clients. Examinations will scrutinize whether advisors are offering advice that aligns with their fiduciary obligations, particularly when recommending high-cost or illiquid products, complex investments, or those sensitive to market conditions like rising interest rates.
In addition, the 2025 exam priorities indicate there will be a heightened focus on Reg BI, ensuring that broker-dealers are recommending retirement products that are in their clients’ best interest, especially for older investors or those saving for retirement.
In particular, the SEC says examinations of broker-dealer practices will focus on those recommended products that are complex, illiquid, or present higher risk to investors. Examples may include highly leveraged or inverse products, crypto assets, structured products, alternative investments, products that are not registered with the SEC (and are therefore less transparent), products with complex fee structures or return calculations, products based on exotic benchmarks, or products that represent a growth area for retail investment.
The SEC will also assess how well advisors and broker-dealers are managing conflicts of interest, particularly when they have financial incentives tied to product recommendations or when transitioning clients’ retirement assets.
“Our 2025 examination priorities identify the key areas of potentially increased risks and related harm for investors,” said Keith Cassidy, Acting Director of the Division of Examinations. “We hope that registrants will evaluate their compliance programs in the areas we identified and make the changes necessary to protect investors and maintain fair and orderly capital markets.”
For fiscal year 2025, in addition to conducting examinations in core areas such as disclosures and governance practices, the Division will also examine for compliance with new rules, the use of emerging technologies, and the soundness of controls intended to protect investor information, records, and assets.
Regarding the use of emerging technologies, including AI-driven investment advice tools, and how these technologies are managed in the context of retirement investments, the SEC will evaluate whether digital tools are used fairly and transparently in advising retirement investors.
The 2025 examination priorities cover a broad landscape of potential risks to investors that firms should consider as they review and strengthen their compliance programs. They are not, however, an exhaustive list of all the areas the Division will focus on in the upcoming year. The scope of any examination includes analysis of other risk factors such as an entity’s history, operations, and products and services.
The SEC’s Fiscal Year 2025 Examination Priorities can be accessed here.
SEE ALSO:
• Crypto and Cybersecurity Among Top SEC Priorities for 2024
• Department of Labor Appeals Two Stays on Fiduciary Rule
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
