The SEC’s Division of Examinations issued a June risk alert reminding investment advisers that merely noting a possible conflict is insufficient to meet fiduciary duties. Examiners will now evaluate whether a firm’s Form ADV disclosures accurately portray the real economic conflicts present in client accounts, including how revenue is generated and fees are billed.
The alert highlights five recurring deficiency patterns and signals that future examination cycles, including the 2026 priorities, will focus heavily on advisers’ compensation structures and the impact of financial incentives on advice. Chief compliance officers, general counsel and outside counsel are urged to ensure disclosures align with actual practices to avoid regulatory scrutiny.
Source: Corporate Compliance Insights