SEC Releases 2025 Examination Priorities: What Investment Advisers Should Know

The SEC has officially released its 2025 Examination Priorities, coincidentally just in time for Halloween. Every year, the SEC’s Division of Examinations announces its priorities, outlining specific areas of concern and risks for market participants.

For investment advisers, the focus areas for 2025 are as anticipated. The four priority areas are:

1. Adherence to Fiduciary Standards of Conduct;
2. Effectiveness of Advisers’ Compliance Programs;
3. Examinations of Advisers to Private Funds; and
4. Never Examined Advisers, Recently Registered Advisers, and Advisers Not Recently Examined.

Key Insights into 2025 Examination Priorities

Looking at the priorities holistically, the SEC continues to focus on core areas for investment advisers, particularly fiduciary duties and compliance programs. These areas are already under significant scrutiny and remain a top concern for advisers.

When comparing the 2025 priorities to the 2024 Examination Priorities, the SEC appears to have followed a similar approach, especially regarding Fiduciary Standards of Conduct. Much of the Division’s focus on illiquid, high-cost, and complex products, as well as conflicts of interest, remains unchanged.

However, one notable update is the specific mention of asset classes “sensitive to higher interest rates or changing market conditions, including commercial real estate.” This marks a call for advisers investing in real estate and similar asset classes to be particularly cautious.

Interestingly, there is no mention of ESG or sustainable investing, which had taken a backseat in 2024 as well. This might be influenced by the stalling of U.S. anti-greenwashing rules, signaling that ESG remains a lower priority for the SEC this year.

The Rise of Artificial Intelligence (AI)

In a significant shift from 2024, the Division has placed a spotlight on artificial intelligence. Last year, AI was briefly mentioned, but 2025 marks a major change. The Division now addresses how advisers are integrating AI into their advisory operations, including portfolio management, trading, marketing, and compliance.

This heightened focus suggests that the SEC is not only aware of the increasing use of AI but is prepared to examine its integration within advisory firms. Advisers leveraging AI, particularly through third-party vendors, should ensure robust oversight, as the Division is likely to scrutinize data protection and potential data leakage during its exams.

Private Fund Managers: Key Areas of Focus

As expected, private fund advisers remain a priority for the Division in 2025. Following the collapse of the Private Fund Rules, it’s likely the SEC will enforce as much of those rules as possible through its examination powers.

Key areas of focus for private fund advisers include:

1. Ensuring disclosures align with actual practices, especially for funds with poor performance or significant withdrawals;
2. The accuracy of calculations and fee allocations;
3. Adequate disclosure of conflicts of interest and risks, along with robust policies and procedures; and
4. Compliance with recent SEC rules, including Form PF and the SEC Marketing Rule.

Conclusion

While the 2025 SEC Examination Priorities may not introduce groundbreaking changes, they provide valuable insight into the SEC’s current focus. With the 2024 elections behind us, the SEC may face potential shifts in 2025 as a new presidential administration takes over. Advisers should remain vigilant in maintaining proper recordkeeping, compliance processes, and adherence to the Investment Advisers Act.

Strengthen Your Compliance Today!
Don’t wait for an SEC exam to uncover potential weaknesses in your compliance program. Our expert team can help you navigate the 2025 SEC Examination Priorities and ensure your firm is fully prepared. Book a complimentary consultation today to gain insights and protect your firm from regulatory risk.