SEC’s 2025 Exam Priorities
The Securities and Exchange Commission (SEC) announced its exam priorities for 2025, signaling a
continued focus on investment advisors, broker-dealers, and Regulation Best Interest (Reg BI). This was
later summarized in a FA magazine blog. In this blog, we’ll highlight the key areas the SEC plans to
scrutinize and solutions designed to support firms in navigating these evolving compliance demands.
1. Regulation Best Interest (Reg BI)
The SEC’s Division of Examinations will concentrate on how broker-dealers comply with Reg BI, which
mandates that firms act in the best interest of retail customers when making investment
recommendations. Key focus areas include:
- Product Recommendations: Ensuring brokers recommend products, strategies, and account
types that are in the best interest of clients, particularly complex or high-risk products like crypto
assets and structured investments. - Disclosure of Conflicts of Interest: Examinations will assess whether firms are transparent about
conflicts and how they mitigate or eliminate them. - Reasonable Alternatives: Firms must demonstrate they have reviewed available alternatives
before making recommendations. - Investor Profiles: Tailoring recommendations to the investment goals, risks, and characteristics
of the investor’s account.
The SEC will also scrutinize recommendations made using automated tools, account selection practices,
and guidance to vulnerable investors, such as seniors or those saving for retirement.
2. Form CRS
Examinations will focus on the accuracy and clarity of a broker-dealer’s Form CRS, which summarizes the
firm’s relationships, services, fees, and conflicts of interest. The SEC will verify that the form has been
properly filed with the Commission and delivered to retail customers.
3. Financial Responsibility Rules
Compliance with financial responsibility rules, including the net capital and customer protection rules,
will remain a key focus. Examinations will assess how well firms handle financial notifications, manage
liquidity risk, and supervise third-party vendors involved in financial reporting.
4. Trading-Related Practices
The SEC will closely examine broker-dealer trading practices, including:
- Bank Sweep Programs and Mobile Trading Apps: To ensure transparency around fees and
conflicts of interest. - Private Company Shares: Reviewing trades in pre-IPO companies and secondary market
transactions. - Retail Order Execution: Checking consistency in order labeling and the pricing of illiquid
instruments like municipal securities and non-traded REITs.
Investment Advisers:
The SEC’s 2025 exam priorities also emphasize the fiduciary duties of investment advisers, particularly
their adherence to the standards of care and loyalty. Here’s how the SEC will focus on investment
advisers:
1. Investment Advice and Fiduciary Obligations: The SEC will examine whether the advice
provided on products, investment strategies, and account types meets fiduciary obligations,
especially regarding:
- High-cost products
- Unconventional or complex instruments
- Illiquid assets
- Assets sensitive to interest rate changes (e.g., commercial real estate)
2. Dual Registrants and Conflicts of Interest: For advisers with affiliated broker-dealers, the SEC will
review:
- Suitability of products for advisory accounts
- Transparency of the adviser’s role in providing recommendations
- Account selection practices (e.g., brokerage vs. advisory) and rollovers
- Mitigation and disclosure of conflicts of interest
3. Financial Conflicts of Interest: The SEC will assess how financial conflicts, including non-standard
fee arrangements, impact the adviser’s ability to provide impartial advice and execute trades in
clients’ best interests.
How can InvestorCOM Help
InvestorCOM offers a suite of solutions designed to help firms and investment professionals stay ahead
of these priorities. These purpose-built, ‘proudly simply’ solutions are designed to help firms comply with best interest principles, including the assessment of costs and reasonably available alternatives, account type rationale, rollover analysis, and Form CRS disclosure obligations.
Stay ahead of the regulatory curve with InvestorCOM.