From Cryptocurrency to the Use of AI: Preparing for the SEC Examination Priorities in 2025

Key Insights and Practical Steps for Employee Compliance 

As the fiscal year begins, the Securities and Exchange Commission (SEC) has unveiled its 2025 Examination Priorities, highlighting critical areas of focus for the financial industry. These priorities offer valuable insights into the SEC’s evolving regulatory landscape and underscore the importance of healthy compliance programs. For firms navigating complex markets, understanding, and preparing for these priorities is essential to ensuring employee regulatory compliance and protecting your firm’s brand trust. 

Key Themes for 2025 

1. Evolving Market Risks 

The SEC’s 2025 priorities reflect the dynamic nature of today’s financial markets. With heightened attention on assets such as: 

• Commercial real estate 
• Illiquid investments 
• Cryptocurrency 

These areas are particularly susceptible to market volatility and economic shifts, requiring firms to adopt adaptive strategies and maintain transparency with investors. 

2. Technological Advancements 

Technology continues to revolutionize financial services, but it also introduces new regulatory challenges. The SEC’s focus on artificial intelligence (AI), automated tools, and digital engagement practices highlights the need for firms to ensure these technologies align with fiduciary duties and regulatory standards.  

In addition, cybersecurity and operational resilience remain top priorities, as firms face increasing threats from cyberattacks and operational disruptions. 

3. Regulatory Updates 

New regulatory initiatives, including the implementation of shortened settlement cycles (T+1) and updates to Form PF (regulatory filing form that certain private fund advisers must file) are reshaping compliance expectations. Firms must stay ahead of these changes by proactively updating their policies, procedures, and operational frameworks. 

Definition – A “shortened settlement cycle,” or “T+1,” means security trades are finalized one business day after the trade date, reducing the previous “T+2” standard of two days. This change aims to lower market risk and improve efficiency for investors. 

Examination Priorities by Market Participants 

Investment Advisers 

For investment advisers, adhering to fiduciary standards remains a cornerstone of the SEC’s priorities. The SEC will scrutinize advisers’ duty of care and loyalty, focusing on: 

• Recommendations involving high-cost products, illiquid assets, and unconventional instruments. 
• Disclosures of conflicts of interest to ensure informed client consent. 
• Effectiveness of compliance programs, including annual reviews and conflict management. 

Advisers to private funds will face additional scrutiny, particularly regarding fee calculations, risk disclosures, and adherence to new SEC rules governing marketing and Form PF amendments. 

Investment Companies 

Registered investment companies (RICs), including mutual funds and ETFs, remain a priority due to their significance for retail investors. The SEC’s examinations will focus on: 

• Fund fees and expenses, including waivers and reimbursements. 
• Oversight of affiliated and third-party service providers. 
• Portfolio management practices, ensuring consistency with disclosures and marketing materials. 

Emerging Risk Areas 

1. Crypto Assets 

The continued growth of cryptocurrency markets has prompted the SEC to intensify its oversight of crypto asset-related activities. Examinations will assess firms’ compliance with securities laws, focusing on: 

• Custody practices and valuation procedures. 
• Risk disclosures and operational resilience, particularly in blockchain technology. 
• Standards of conduct when recommending crypto investments to retail and retirement clients. 

2. Artificial Intelligence and Digital Engagement 

The integration of AI into financial services presents both opportunities and risks. The SEC will examine: 

• Accuracy of representations regarding AI capabilities. 
• Policies and procedures for supervising AI-driven operations, including fraud detection and portfolio management. 
• Investor protections in digital engagement practices, ensuring advice aligns with clients’ investment profiles. 

3. Cybersecurity and Operational Resilience 

With cyber threats on the rise, the SEC will prioritize: 

• Firms’ policies for safeguarding customer information and preventing data breaches. 

• Governance practices for managing third-party risks and operational disruptions. 

• Incident response plans, particularly for ransomware attacks and geopolitical risks. 

Industry-Specific Highlights 

Broker-Dealers 

Broker-dealers will face examinations focus on: 

• Recommendations involving complex, illiquid, or high-risk products. 

• Disclosures of conflicts of interest and suitability of account types. 

• Trading practices and supervisory controls in branch offices. 

Clearing Agencies 

Clearing agencies designated as systemically important will undergo annual examinations to assess: 

• Risk management frameworks for financial and operational stability. 

• Compliance with the SEC’s Standards for Covered Clearing Agencies. 

Practical Steps for Employee Compliance Teams 

For companies to succeed, they must take proactive measures to align with the SEC’s priorities and strengthen their internal compliance frameworks. Here are key steps to consider: 

1. Enhancing Compliance Programs 

• Conduct comprehensive annual reviews to address conflicts of interest and operational risks. 
• Ensure compliance programs are tailored to the firm’s unique business model and risk profile. 
• Leverage automation to improve efficiency and mitigate human error.  

2. Staying Ahead of Regulatory Changes 

• Monitor updates to SEC rules and implement necessary policy changes promptly. 
• Train staff on new compliance requirements, instilling a culture of compliance to ensure consistent adherence. 

3. Leveraging Technology 

• Adopt advanced compliance solutions technology, like StarCompliance’s (Star) SaaS-based employee compliance suite of products to automate streamline workflows and mitigate risks. 
• Utilize tools for monitoring cybersecurity threats and managing operational resilience. 

Take Action 

The SEC’s 2025 Examination Priorities emphasize the importance of proactive compliance in an ever-evolving regulatory landscape. By addressing emerging risks, leveraging technology, and staying informed about regulatory changes, firms can build robust compliance programs that protect investors and foster trust. With the right strategies and tools in place, 2025 can be a year of growth and resilience for financial firms. 

Want to learn how Star can support your compliance efforts and ensure your firm is prepared for the year ahead? Schedule a complementary demo here.

Steve Brown

As Head of Business Development, Steve Brown is responsible for helping drive growth at Star, with a focus on go-to-market planning, data and vendor partnerships, channel sales, new markets, and mergers and acquisitions. Steve joined Star in April 2021, and brings with him 25 years of experience advising financial firms on regulatory compliance. Prior to joining Star, Steve was Director of Broker-Dealer Client Services at Compliance Risk Concepts LLC, a senior director at PwC, and Head of Fixed Income and Capital Markets Compliance at U.S. Bancorp Investments, Inc. Steve began his career at Wachovia, where he was Head of Global Investment Banking Compliance and Control Group, and is considered a pioneer in the control room space—having established the bank’s first formal control room function.

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