SEC FY 2027 examination priorities signal increased focus on artificial intelligence and regulatory coordination

On October 23, 2026, the SEC Division of Examinations announced its Fiscal Year 2027 Examination Priorities,¹ highlighting two developments that may significantly affect how registered investment advisers, broker-dealers, in-house counsel, and compliance professionals prepare for examinations. First, the Division is increasingly incorporating artificial intelligence (AI) (referred to in the priorities as “super intelligence” or “SI”) into its examination and risk assessment processes. Second, the Division continues to strengthen coordination with SEC policymaking divisions and other domestic and international regulators. (The FY 2027 priorities address several additional areas, including economic conflicts, private credit, proxy advisory firms, and complex products, which are outside the scope of this article.)

Together, these initiatives suggest a regulatory environment in which examinations are becoming increasingly data-driven and technologically sophisticated, and more closely integrated with broader regulatory and policy objectives. On the AI front, firms will likely face heightened scrutiny of AI-related disclosures and controls, as well as their readiness to address AI-enabled cyber threats. At the same time, examiners’ growing use of analytics may enhance their ability to identify inconsistencies across large datasets and disparate record keeping systems. Examination observations are also increasingly likely to inform future guidance, rulemaking, and enforcement initiatives, and firms subject to multiple regulatory regimes should be prepared for more coordinated or parallel exam activity.

The priorities follow the Division’s October 1, 2026 release of a new Examination Handbook that provides additional information about the examination process and what firms can expect. As discussed in our prior alert, SEC Division of Examinations publishes Exam Handbook: what investment advisers, broker-dealers, and other registrants should know, the Handbook offers important insight into the Division’s evolving examination approach and procedural expectations for registrants. 

How the SEC is using artificial intelligence in examinations

The Division describes a “sustained effort” to integrate AI into examinations and risk assessment in a manner that supplements, rather than replaces, examiner judgment. According to the priorities, the SEC is modernizing examination processes through increased automation and the use of AI-supported tools designed to identify patterns and risks across complex datasets. The Division is also developing an examination projection model intended to enhance risk-based allocation of examination resources and has established workforce training initiatives to better equip staff to oversee increasingly technology-driven operations.

Notably, the SEC has not provided significant detail regarding the specific models, vendors, or datasets supporting these initiatives, nor has it explained precisely how AI-generated insights may influence examination selection or document requests. As the Division’s analytical capabilities evolve, inconsistencies across firm data may become easier to identify and more likely to prompt follow-up inquiries. For example, examiners will review the accuracy and consistency of fee and expense calculations. Firms may therefore want to assess whether calculations, books and records, regulatory filings, client disclosures, and marketing materials present consistent information. The priorities also suggest that examination selection may increasingly be influenced by identifiable risk factors, including recent registration, significant business changes, mergers and acquisitions, expansion into new asset classes, geographically dispersed operations, and recommendations involving complex or illiquid products.

The emphasis on technology should not, however, obscure the continuing importance of examiner judgment. The quality, completeness, and consistency of a firm’s data production will remain critical, as will contemporaneous documentation explaining significant compliance decisions and supervisory judgments.

Scrutiny of firms’ AI use

The SEC’s focus on artificial intelligence extends well beyond its own examination program. The priorities make clear that examiners will evaluate how firms use AI across a range of business and compliance functions, including research, client communications, portfolio management, compliance surveillance, fraud detection, anti-money laundering programs, and trading activities.

Rather than establishing a separate regulatory framework for AI, the Division emphasizes that existing obligations remain fully applicable. Examiners are expected to assess whether firms’ representations concerning automated tools and algorithms are accurate, whether actual operations align with those representations, and whether algorithmic outputs remain consistent with investor profiles, investment objectives, and fiduciary obligations. The SEC also intends to review governance frameworks surrounding AI tools used in compliance and operational functions, including the extent of testing, monitoring, human oversight, and escalation procedures.

Cybersecurity presents another significant area of focus. The priorities specifically reference AI-enabled threats, including phishing attacks, deepfakes, and other forms of social engineering. Examiners will also focus on risks associated with third-party technology providers and controls governing access to customer accounts and information. Firms may want to consider whether their Regulation S-P and Regulation S-ID programs adequately address emerging risks involving AI-generated fraud and credential theft.

The priorities also underscore that there is no separate AI compliance standard. Any disconnect between a firm’s public descriptions of AI capabilities and the actual functionality of its systems is likely to be evaluated under existing disclosure, fiduciary, supervisory, Regulation Best Interest and compliance rule obligations.

Greater integration between examinations and policymaking

A second notable theme throughout the FY 2027 priorities is the Division’s increasing integration with the SEC’s policymaking functions. The Division explains that it develops its priorities in consultation with other SEC divisions and offices and regularly shares examination observations and industry developments across the agency to help inform examination planning, policy development, and the consistent application of federal securities laws.

The Division further signals that recently adopted rules will receive significant attention during examinations. Areas of focus include the Customer Protection Rule amendments relating to daily reserve computations and Treasury clearing, new clearing agency requirements, and amendments to Regulation S-P. FY 2027 will be the first full examination cycle following the compliance dates for the Regulation S-P amendments. Early examination findings in these areas may influence future guidance and regulatory expectations, making implementation efforts particularly important.

The priorities further reflect increased coordination beyond the SEC. The Division highlights collaboration with the SEC’s Cross-Border Task Force, FINRA and foreign regulators, as well as Memoranda of Understanding with both the Commodity Futures Trading Commission (CFTC) and the National Futures Association. Notably, the Memorandum of Understanding with the CFTC provides for coordinated examination planning and opportunities for joint or aligned examinations. For firms subject to oversight by both agencies, these developments suggest an increased likelihood of coordinated regulatory scrutiny and the importance of maintaining consistent examination responses across regulators.

Key takeaways

The FY 2027 priorities suggest that firms may wish to focus on several areas in advance of their next examination:

• reviewing inventories of AI tools, AI-related disclosures, marketing materials, and governance frameworks to ensure that descriptions of technology align with actual practices
• evaluating whether compliance, surveillance, AML, and operational functions that utilize AI are subject to appropriate testing, oversight, and documentation
• strengthening cybersecurity controls to address AI-enabled threats, including phishing, deepfakes, and account takeover risks
• assessing finder, referral, and compensation arrangements involving unregistered persons or entities
• reviewing implementation efforts relating to recently adopted SEC rules
• ensuring that examination responses and document productions are accurate, complete, and consistent, particularly given the SEC’s increasing use of data analytics and cross-regulatory coordination

Conclusion

The FY 2027 priorities reinforce several practical points. First, firms can expect examinations that involve more sophisticated, technology-driven analysis of their data. Second, examination findings may affect broader SEC policy. Finally, firms that evaluate their AI governance, data integrity, cybersecurity preparedness, and examination readiness may be better prepared for the SEC’s changing examination approach. 

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If you have any questions about this legal briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.

_{1  https://www.sec.gov/files/2027-exam-priorities.pdf}