For many registered investment advisers, few words create more anxiety than "SEC examination."

Whether your firm has been through multiple exams or you're preparing for your first, it's natural to wonder:

What will regulators ask for?

What are they really looking at?

What are the most common mistakes firms make?

Those questions—and many more—were addressed during a recent Financial Experts Network webinar featuring securities attorney Michelle Atlas Quinn, who provided a practical look inside today's SEC examination process and the regulatory priorities shaping advisory firms in 2026.

Her message was reassuring but clear: firms that build a culture of compliance year-round are almost always in a stronger position than those scrambling to prepare after receiving an examination notice.

An SEC Exam Is More Than a Compliance Checklist

One of the biggest misconceptions Michelle addressed is that SEC examinations are simply document reviews.

They're not.

While examiners certainly review policies, procedures, disclosures, and client files, they're also evaluating something much broader:

Does your firm's day-to-day behavior match what you've promised clients and regulators?

In other words, it's not enough to have an excellent compliance manual sitting on a shelf.

The SEC wants to see that your policies are actually being followed.

That means firms should be able to demonstrate:

• Ongoing compliance testing
• Employee training
• Documentation of supervisory reviews
• Consistent client communications
• Periodic updates to disclosures
• Active oversight of vendors and technology

Documentation often tells the story of your compliance program.

Fiduciary Duty Is the Foundation of Everything

Throughout the webinar, Michelle returned repeatedly to one central concept:

Every SEC examination begins and ends with fiduciary duty.

Whether regulators are reviewing advisory fees, marketing materials, cybersecurity procedures, or investment recommendations, they're ultimately asking one question:

"Did the adviser act in the client's best interest?"

That means firms should continuously evaluate whether they are:

• Providing advice appropriate for each client
• Fully disclosing material conflicts of interest
• Seeking best execution for trades
• Monitoring client accounts as promised
• Maintaining accurate and current disclosures

Fiduciary duty isn't something firms address once a year.

It's an ongoing responsibility.

Cybersecurity Has Become a Core Compliance Issue

Cybersecurity was one of the most discussed topics during the session—and for good reason.

Protecting client information has become one of the SEC's highest priorities.

But cybersecurity isn't simply about installing antivirus software.

Michelle encouraged firms to think much more broadly.

Questions every advisory firm should ask include:

• Are employees using multi-factor authentication?
• Have we tested our incident response plan?
• Do we understand how our vendors protect client data?
• Are employees receiving regular phishing awareness training?
• Can we recover quickly if systems become unavailable?

Cybersecurity has evolved from an IT issue into a firm-wide governance responsibility.

Marketing Is Still Receiving Significant Attention

Many advisors are surprised by how frequently marketing issues appear during SEC examinations.

Michelle encouraged firms to periodically review every public-facing communication, including:

• Websites
• Blogs
• Social media
• Podcasts
• Presentations
• Client newsletters

The goal isn't to eliminate marketing.

It's to ensure marketing accurately reflects the firm's actual services and complies with the SEC's Marketing Rule.

Something as simple as an outdated biography or an inaccurate fee description can generate unnecessary examination questions.

Custody Rules Can Surprise Even Experienced Advisors

Another area generating frequent examination findings involves custody.

Many firms assume they don't have custody because they never physically hold client assets.

However, Michelle explained that custody rules extend much further than many advisors realize.

Serving as a trustee, acting under certain powers of attorney, maintaining standing transfer instructions, or providing certain fiduciary services can all create custody implications.

Understanding these situations before an examination can prevent unexpected compliance issues.

Artificial Intelligence Is Creating New Compliance Questions

Like many industries, financial services is rapidly adopting artificial intelligence.

Michelle acknowledged the tremendous efficiency AI can provide but reminded advisors of one important principle:

Using AI does not transfer responsibility.

Advisors remain accountable for:

• Accuracy
• Confidentiality
• Appropriate supervision
• Record retention
• Compliance with advertising rules

AI can be an outstanding productivity tool—but it should always be paired with human judgment and oversight.

Strong Documentation Protects Everyone

If there was one theme that surfaced repeatedly throughout the webinar, it was documentation.

Regulators cannot evaluate conversations they cannot see.

They evaluate records.

Good documentation demonstrates:

• Why recommendations were made
• How conflicts were addressed
• What reviews were performed
• When policies were updated
• How compliance testing was conducted

Poor documentation, on the other hand, often creates unnecessary questions—even when advisers acted appropriately.

One simple principle applies:

If you can't document it, it becomes much harder to demonstrate it happened.

Preparing Before the Examination Notice Arrives

Perhaps Michelle's most practical advice was this:

Don't prepare for an SEC examination after receiving the examination letter.

Prepare every day.

Firms that conduct periodic internal reviews, update disclosures regularly, test compliance procedures, monitor vendors, and document their activities throughout the year generally experience a much smoother examination process.

Compliance should become part of a firm's culture—not simply an annual project.

Final Thoughts

An SEC examination can feel intimidating.

But it also provides an opportunity.

Well-prepared firms often discover weaknesses before regulators do, strengthen internal processes, improve client service, and build greater confidence across their organizations.

Ultimately, compliance isn't about satisfying regulators.

It's about protecting clients, strengthening the advisory practice, and demonstrating the professionalism that clients expect from trusted fiduciaries.

When firms embrace that mindset, examinations become far less stressful—and much more manageable.

Five Questions Advisors Frequently Ask About SEC Examinations

Q1: How often should an advisory firm review its compliance program?

Compliance should be an ongoing process rather than an annual event. Firms should regularly review policies, update disclosures, conduct testing, document supervisory activities, and monitor regulatory developments throughout the year.

Q2: What is the most common mistake firms make before an SEC examination?

Many firms assume having written policies is enough. Examiners also want evidence that those policies are actively followed through documentation, employee training, compliance testing, and supervisory oversight.

Q3: Why is cybersecurity receiving so much regulatory attention?

Financial advisory firms maintain sensitive client information that makes them attractive targets for cybercriminals. Regulators increasingly expect firms to demonstrate comprehensive cybersecurity governance, employee training, vendor oversight, and incident response planning.

Q4: Does using artificial intelligence create additional compliance responsibilities?

Yes. While AI can improve efficiency, firms remain responsible for the accuracy, confidentiality, supervision, and regulatory compliance of any work generated with AI tools. Human review remains essential.

Q5: What is the best way to reduce stress during an SEC examination?

Build a culture of compliance long before an examination occurs. Firms that maintain organized records, regularly review disclosures, document key decisions, and continuously monitor their compliance programs are generally much better prepared when regulators arrive.