Crypto Is Missing From SEC's 2026 Exam Priorities for Financial Advisors. It's a Big Change. — Barrons.com
By Kenneth CorbinWhat a difference a year makes. Last October, when the Securities and Exchange Commission issued its examination priorities for 2025, it cautioned investment advisors and other registrants that it would be looking out for how firms were handling crypto investments, including whether they were adhering to their regulatory standards of conduct and able to demonstrate that they understood the products they were recommending.A little more than a year later, the SEC has issued the first set of exam priorities under Chairman Paul Atkins, and digital assets don't get a mention.It is the latest indicator of the sharp contrast between the focus of the current SEC and the agency under the Biden administration, when it was chaired by Gary Gensler, who staked out the controversial position that most crypto offerings were securities and should be registered and regulated accordingly. Gensler brought numerous actions against unregistered crypto offerings and was widely reviled in the industry.Atkins, in contrast, lobbied on behalf of the crypto sector during the time since the end of his last government stint — as an SEC commissioner — and has argued against Gensler's campaign to regulate digital assets like conventional securities offerings. His stance reflects the broader pro-crypto posture of the second Trump administration.Trading tech. Much of the rest of the SEC's exam priorities keeps with past years' guidance. Like last year, the 2026 priorities cite artificial intelligence, automated trading tools, and other emerging technologies as potential areas of concern for examiners.The latest exam priorities indicate that SEC staff will evaluate whether advisors are meeting their fiduciary obligations and review how they are handling conflicts of interest and ensuring that the costs, risks, and liquidity of the products they recommend align with their clients' goals. Those fundamentals of advisor oversight perennially appear on the priorities list.Alts in focus. This year the SEC says examiners will pay special attention to advisors who are recommending alternative investments such as private credit or private equity (but not crypto), as well as complex, illiquid, and high-cost products.The Investment Adviser Association, a trade group representing SEC-registered firms, lauded the commission for continuing with precedent and publishing the exam priorities, "which, though not required, are highly useful to advisers and their compliance efforts," the group says.Data security. The SEC says examiners visiting advisors, brokers, and others covered by Regulation S-P, which lays out a compliance framework for client privacy and data security, will evaluate how firms are updating their policies to comply with changes to that rule. In May 2024, the SEC amended Reg S-P to require covered firms to issue client notices after a data breach and develop detailed incident detection and response plans.For large firms, including RIAs with more than $1.5 billion in assets under management, the compliance date for the S-P amendments is Dec. 3. Smaller entities must come into compliance by June 3, 2026."[T]he priorities indicate a coming sweep focused on firms' adoption and implementation of policies and procedures related to the amendments to Regulation S-P," says Robert Baker, managing director of the mock exam team at the ACA Group, a compliance consultancy. "As with the implementation of any new rule, firms should expect a sweep followed by a risk alert explaining the status of compliance and common deficiencies."This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.