Carlo di Florio. Courtesy photo
As we move through 2025, investment advisors face a regulatory landscape that is both familiar and evolving.
While the SEC’s examination priorities remain largely consistent with the 2025 Exam Priorities published last October, the environment for SEC examiners has shifted due to staffing reductions, a lighter rulemaking agenda, and a shift away from enforcement as a first response to compliance weaknesses.
This shift at the SEC creates an opportunity for firms to refocus on bolstering foundational compliance practices with AI-enabled compliance technologies.
Familiar Priorities, New Pressures
The SEC’s focus on investment advisors, particularly those serving retail investors, persists. Furthermore, the SEC has continued to stress that enforcement is still the likely response to evidence of fraud or breach of fiduciary duty.
Examiners continue to scrutinize advisors for how well they are complying with their fiduciary duties, with a particular focus on conflicts of interest, fee disclosures and marketing practices. Notably, in a recent survey conducted by ACA, the Investment Adviser Association and Yuter Compliance, advisors reported that the most common deficiencies cited in 2025 include advertising and marketing violations, books and records issues, and conflicts of interest.
I have also seen some evidence that SEC examiners are issuing more detailed deficiency letters that provide firms with more information about compliance weaknesses but no enforcement referral, giving firms the opportunity to self-correct. Firms should not mistake this opportunity for indifference.
I expect to see examiners schedule corrective actions reviews (CARs) to confirm that firms have fixed noted deficiencies. A CAR that reveals a firm has not taken its deficiency letter seriously is still likely to result in an enforcement referral. Firms must act swiftly to remediate deficiencies and document their efforts thoroughly.
Bridging Gaps With Technology and Risk Management
As compliance technology continues to evolve with the advent of generative artificial intelligence, new tools are arriving that significantly improve upon manual compliance processes and reactive fixes.
Technology, particularly AI and automation, offer powerful solutions to strengthen compliance and surveillance, while enhancing documentation and enabling real-time risk monitoring.
AI-powered tools can analyze many elements of a firm’s operations, including daily trading, to detect patterns and anomalies that signal compliance risks. Automated systems can support compliance officers conducting marketing reviews, Code of Ethics and conflicts management, AML/KYC diligence, and surveilling personal trading, client trading, electronic communications, and expert networks, to name just a few examples. These innovations not only improve efficiency but also help firms stay ahead of regulatory changes and align with best practices, as these tools evolve in response to SEC risk alerts, examination deficiencies, and industry surveys, such as the Investment Management Compliance Testing Survey.
Strengthening Internal Controls
Technology alone is not enough to ensure that investment advisors meet the fiduciary standard set by the Advisers Act. Investment advisors should embed a compliance-first culture across the organization. This means ensuring that everyone in the organization understands that advisory clients trust the firm to exercise due care and act in their best interest, across all business lines.
Employees should be alert to conflicts of interest and take personal responsibility for confirming that conflicts are disclosed and carefully managed. Firms should adopt policies an procedures that empower employees to report potential conflicts and require periodic reviews to look for new conflicts, especially when launching new products or entering new markets.
Employees should understand that they are on the front line in ensuring the firm truly earns their clients’ trust every day, with compliance serving as their backstop. Compliance officers promote and cement a firm’s compliance culture in several ways. They communicate, train, and reinforce a culture of compliance. They check to see whether the firm is doing the right thing, by monitoring, testing, conducting annual reviews, performing mock exams, and continuously updating procedures to reflect evolving risks and regulations. Compliance officers also play a critical role in educating staff about fiduciary obligations and ensuring that every employee understands their role in maintaining ethical standards.
Opportunity in Simplicity
Firms should not interpret the current pause in rulemaking and the shift away from enforcement as a reprieve from their compliance obligations. Examiners have not slowed down or pulled back and the SEC has continued to emphasize advisors’ fiduciary duties.
I encourage firms to see this moment as an opportunity to conduct comprehensive reviews of their compliance programs, reinforce internal controls, refine disclosures, and adopt technologies that strengthen long-term compliance resilience.
Firms should embrace this moment with intention. By returning to the fundamentals and integrating smart technologies, advisors can not only meet today’s regulatory demands but also build resilient programs that adapt to tomorrow’s challenges.
Carlo di Florio is president of ACA Group, a provider of compliance, risk and technology solutions for financial services firms.
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