SEC FY2027 Exam Priorities: What Investment Advisers and Private Fund Managers Need to Know

On Oct. 23, 2026, the SEC’s Division of Examinations (the “Division”) released its Fiscal Year 2027 Examination Priorities (the “2027 Priorities”).[1] On Oct. 1, 2026, the Division also published a new SEC Exam Handbook (the “Handbook”), which walks registrants through each stage of an exam.[2] Neither document has the force of law. Together, however, they show where examiners will spend their time in the coming year and how they will conduct exams. Both are relevant to annual compliance reviews and to the Form ADV annual updating amendment due in Q1 2027.

The 2027 Priorities emphasize two themes of particular relevance to investment advisers and private fund managers. The first is technology. The Division notes that registrants are increasingly using super intelligence (“SI”) for research, drafting, coding, client communications, portfolio management and compliance surveillance. The Division is intensifying its efforts to understand how these tools influence outcomes and whether firms continue to meet existing, technology-neutral obligations. The Division is also integrating SI into its own risk assessment and exam work, while stressing that SI will supplement, not replace, examiner judgment.

The second theme is engagement. Through its Compliance Outreach Program, the Division hosts regional and national forums where staff share exam observations and discuss compliance directly with registrants. A virtual national seminar on Nov. 19, 2026, will include panels on private fund adviser topics, conflicts of interest and compliance program effectiveness.[3]

Key 2027 Priorities for Investment Advisers and Private Funds

Fiduciary Standards. Fiduciary duty remains the centerpiece. Examiners will assess whether advisers have provided full and fair disclosure of all material facts, conducted reasonable diligence on recommended products, and maintained reasonable valuation processes. A key priority for 2027 is economic conflicts of interest. These include fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, and the treatment of deposits and withdrawals.

This focus builds on the Division’s June 9, 2026, Risk Alert, Examinations Observations of Investment Adviser Obligations Related to Economic Conflicts of Interest (the “Risk Alert”).[4] The Risk Alert found three recurring problems: (i) conflicts that were undisclosed, or disclosed incompletely or misleadingly; (ii) practices inconsistent with advisory agreements and disclosures; and (iii) compliance programs that did not fully address economic conflicts.

For private fund advisers, examiners will evaluate whether risk disclosures meet fiduciary standards and whether internal controls address both fund-level and investment-level risks. Areas of focus include investment allocations, use of debt and fund-level credit facilities, use of affiliated service providers, and the accuracy of fee and expense calculations at the fund and investment level. Advisers that recommend difficult-to-trade, illiquid or unusually structured products will receive priority attention. Examples include loans made by private funds or business development companies (“BDCs”) and investments in private companies through special purpose vehicles (“SPVs”). Examiners will weigh liquidity, risk profile, volatility, time horizon and costs, including exit costs, against client objectives. Consistent with the Division’s parallel focus on private credit in its investment company program, private fund managers should expect particular scrutiny of private credit valuation[5], redemption and liquidity terms, and disclosure of related conflicts. Finally, the Division will review advisers that give third parties access to client accounts and advisers that rely on proxy advisory firms.

Compliance Programs. Examiners will evaluate the core components of the compliance program required by Rule 206(4)-7, as appropriate to each exam:

• Marketing: consistency of performance presentations with actual practice.
• Valuation: reasonableness of methodologies, particularly for illiquid holdings.
• Trading and portfolio management: allocation, best execution and consistency with stated strategies.
• Disclosure and filings: accuracy and timeliness.
• Conflicts: whether policies are reasonably designed to address conflicts in light of the firm’s particular operations, are actually implemented, and address fee-related conflicts arising from compensation structures.

Examiners will typically analyze the annual compliance review. The Division will focus on firms that have changed business models, begun advising new client types or asset classes, offered new services, grown through mergers or acquisitions, or operate from geographically dispersed offices. Examiners will ask whether the compliance program has been adapted and new conflicts addressed. Advisers with activist strategies should expect review of Schedule 13D/G and Forms 13F, 13H, 3, 4, 5 and N-PX filings. Never-examined and recently registered advisers also remain a priority.

Cross-Cutting Risk Areas. Cybersecurity reviews will cover governance, data loss prevention, access controls, ransomware response and third-party vendor risk. The Division will examine how firms prepare for SI-enabled attacks, such as SI-generated phishing and deepfake voice or video used for social engineering, and how they monitor their own SI use. With the amended Regulation S-P now in effect, examiners will evaluate incident response programs, customer notification procedures and service provider oversight. Regulation S-ID reviews will focus on red flags for account takeovers and fraudulent transfers.

How 2027 Compares to 2024–2026

Omission from the list does not mean an area is off limits. The priorities are expressly non-exhaustive, and custody, Marketing Rule and Form PF compliance remain standard exam modules.

What the Exam Handbook Means in Practice

The Handbook explains how the 2027 Priorities translate into actual exams. Several points are worth highlighting:

• Selection is risk-based. Factors include conflicts created by products and services, changes in leadership or key personnel, time since registration or the last exam, and access to client assets. These factors mirror the 2027 Priorities’ focus on conflicts, M&A activity and never-examined advisers. A firm that has recently grown, launched a credit strategy or changed its chief compliance officer should assume an elevated chance of selection.
• Examiners read filings first. Staff review filings and websites before the exam begins, and the Handbook notes that current, accurate filings can reduce the number of findings. This makes the Q1 2027 Form ADV annual amendment an exam-readiness exercise.
• Be prepared to produce quickly. Records should generally be available within 24 hours, although staff usually allow two weeks for the initial request. Examiners may contact custodians, administrators and auditors directly to verify assets, which is particularly relevant for funds holding private credit and other illiquid positions.
• Process expectations. Privilege claims require a detailed log. Staff will not consent to recording or SI notetaking tools during interviews, a point that intersects with the SI theme above. Firms should make knowledgeable personnel available, especially on new products.
• Most exams end in a deficiency letter. A written response is typically due within 30 days, and prompt corrective action may weigh against a referral to the Division of Enforcement. Staff will generally issue a disposition letter within 180 days after records are received and any on-site work is complete.

Action Points

We suggest that clients consider the following steps:

1. Reconcile fees and expenses against governing documents. Test fund- and investment-level fees, offsets, affiliated service provider charges and credit facility costs against LPAs, side letters and disclosures, using the Risk Alert’s observations as a checklist. Correct any errors promptly and document the corrections.
2. Treat the Q1 2027 Form ADV annual amendment as exam preparation. Under Rule 204-1(a)(1), the amendment is due within 90 days of fiscal year end, which is March 31, 2027, for calendar-year filers. Consider replacing “may” language with definitive statements where a conflict exists. Refresh Part 2A Items 5 (fees), 8 (risks, including leverage and illiquidity), 10 (affiliations), 11 (conflicts), 12 (brokerage) and 17 (proxy voting). Confirm the accuracy of Part 1A and Schedule D private fund data.
3. Confirm Regulation S-P readiness. Verify that your incident response program, customer notification procedures and service provider oversight are documented, tested and supported by the records required under Rule 204-2(a)(25).
4. Put governance around SI. Inventory the SI tools in use, adopt monitoring and supervision procedures, and add deepfake and phishing scenarios to cybersecurity and identity theft training. Confirm that any public statements about SI capabilities are accurate.
5. Revisit valuation and liquidity disclosure. Review disclosure for private credit, SPVs and fund-level loans, including redemption terms and related conflicts.
6. Use the annual review to address change. Document how the compliance program has adapted to acquisitions, new strategies and vendor access. Records should be retained for five years under Rule 204-2(a)(17) and (e)(1).
7. Document oversight of proxy advisers and confirm activist filings. Document diligence and ongoing oversight of any proxy advisory firm relied upon and confirm the timeliness of Schedule 13D/G, Form 13F, Form 13H and Section 16 filings.
8. Prepare an exam-response playbook. Pre-assemble core production sets, adopt a privilege log protocol, and brief interviewees.

Please contact your Honigman relationship attorney with any questions about the 2027 Priorities or your firm’s exam readiness.

[1] Securities and Exchange Commission, Division of Examinations, Examination Priorities: Fiscal Year 2027, available at https://www.sec.gov/files/2027-exam-priorities.pdf.

[2] Securities and Exchange Commission, Division of Examinations, The SEC Exam Handbook: A Practical Guide on Process and Engagement (published Oct. 1, 2026), available at https://www.sec.gov/files/exam-handbook.pdf.

[3] See SEC, 2026 Compliance Outreach Program National Seminar for Investment Advisers and Investment Companies.

[4] See SEC Division of Examinations, Risk Alert (June 9, 2026); full text available at https://www.sec.gov/files/observations-ia-obligations-related-economic-conflicts-interest-060926.pdf.

[5] See Statement on Fair Value Measurement and Disclosure Consideration for Private Assets (Sept. 28, 2026).