The SEC’s Division of Examinations has released its priorities for 2026, outlining where regulatory attention will focus in the coming year. For alternative investors — including hedge funds, private equity, venture capital, and private credit advisers — these priorities function as both a supervisory roadmap and a benchmark for compliance maturity. This year’s agenda reinforces familiar expectations around fiduciary duty, conflicts of interest, and compliance program effectiveness. At the same time, it elevates cybersecurity readiness, identity theft prevention programs, and oversight of complex, illiquid, and long-lock-up strategies.
A notable structural shift from 2025 is that private fund advisers are no longer separated into their own standalone category. Instead, private funds and alternative products are woven into nearly every priority area. This should not be misinterpreted as reduced attention. If anything, it indicates that the Commission views alternative investors as a core risk population whose activities permeate the market and whose controls must be fully operationalized.
Private Funds as a Standard Exam Risk Profile
Fiduciary duty remains at the heart of examinations. Examiners continue to expect advisers to demonstrate that they are identifying and mitigating conflicts that arise from compensation structures, side-by-side vehicle management, allocation decisions, differential investor rights, and co-investment arrangements. Disclosures are expected to be specific and reflective of actual practice — not hypothetical scenarios or generalized conflict language.
Alternative strategies often involve locked-up capital, harder-to-value assets, or liquidity mismatches that are less intuitive to investors. For that reason, the SEC intends to closely review how advisers substantiate decisions such as the allocation of attractive trades between parallel funds, funds-of-one, and SMAs; the operational fairness of co-investment opportunities; and the administration of side letters, particularly those involving reduced fees or preferential liquidity. Stronger firms increasingly rely on system-driven documentation — rather than email trails — to demonstrate how conflicts are assessed and addressed over time.
Compliance Program Effectiveness
The SEC will continue to evaluate whether advisers have implemented compliance programs that function in practice. This includes governance around valuation oversight for illiquid assets; supervision of marketing, especially performance and hypothetical results; trading and brokerage controls; custody considerations tied to private fund structures; and the accuracy of filings such as Forms ADV and PF.
Business expansions — for example, entering the private credit space or launching a new co-investment structure — must trigger immediate reassessment of the firm’s risks and control environment. Examiners expect compliance monitoring and testing to reflect the current state of the business, not the business as it was a year or two ago. Compliance teams operationalizing their programs through automated workflows and centralized audit trails are better positioned to prove effectiveness when examiners request evidence.
Conflict Management and Allocation Controls
Allocation fairness continues to be a high-risk area. When multiple funds pursue similar opportunities, advisers must be able to defend how decisions are made and ensure investors are not disadvantaged by cross-fund dynamics. Oversight of affiliated relationships remains equally important — whether advisers use affiliates for financing or services, or when internal personnel serve on portfolio company boards. Regulators expect clear, documented monitoring of how these relationships are managed.
The key theme here is that the SEC wants to see real controls at work: approvals that were made, exceptions that were escalated, and supervisory reviews that resulted in changes. Written policies alone are no longer persuasive in examinations.
Fees, Expenses, and Valuation
Although the private fund category is embedded across the priorities, fee and valuation issues remain persistent examination focus areas. The SEC will review whether broken-deal costs and fund-level expenses are allocated properly; whether offsets and rebates are calculated accurately; whether adviser-led restructurings are governed in investor-protective ways; and whether valuation committees have appropriate independence and documentation supporting pricing decisions.
This is especially critical for alternative investors dealing in private credit and other complex strategies. Regulators expect to see a governance structure in which valuation decisions are challenged, models are periodically validated, and supporting records are retained and easily retrievable. Compliance practices that rely on scheduled, evidenced testing — rather than annual check-ins — are increasingly becoming a differentiator.
Cybersecurity and Data Privacy
The SEC’s cybersecurity agenda continues its rise into the center of fiduciary expectations. Under the amended requirements of Regulation S-P, advisers must maintain written programs designed to safeguard investor information, including documented incident response procedures. Regulation S-ID further requires identity theft detection and response capabilities. Examiners will probe how well firms can prevent, detect, contain, and remediate cyber incidents — especially given the sensitivity of LP and investor data.
Alternative investment structures often rely on fund administrators, investor portals, data rooms, and external reporting systems. This increases the importance of thorough vendor oversight, contingency planning, and timely documentation that cyber-related tasks are routinely performed. Investors are already demanding these controls; regulators are now treating them as table stakes.
Oversight of AI and Automated Tools
The adoption of automated surveillance tools, alternative data, and AI-assisted decision-making continues to raise regulatory concerns. Examiners are likely to request evidence that firms understand the limitations of their models, properly supervise those tools, and avoid exaggerated marketing claims tied to technology. For systematic and quantitative alternative investors, model governance — including testing, approvals, and usage documentation — should be well established before an examiner arrives.
Emerging Managers and First-Time Exam Risk
Newly registered advisers and managers that have recently launched private funds may find themselves examined much earlier in their lifecycle than in previous years. Regulators are sending a clear signal that emerging private market participants must have controls comparable to longstanding firms.
Those who centralize compliance activities into a single system of record create transparency that can significantly improve early exam outcomes.
Practical Next Steps for Alternative Investors
The practical implication of the 2026 priorities is that oversight cannot be theoretical. Risk assessments must reflect the firm’s current portfolio mix; disclosures must match reality; and control testing must be performed routinely with results captured in a defensible format. The firms that succeed are those who can show that their compliance programs are functioning every day, not only when preparing for an exam.
Many alternative investors are adopting workflow-driven compliance approaches that schedule recurring oversight tasks, manage approvals and escalations, and store documentation in centralized hubs so it can be retrieved quickly for regulators or LP due diligence. Platforms like Skematic support this shift by unifying key elements of compliance operations — from conflicts oversight to task tracking to vendor monitoring — into one environment.
Final Takeaway
Alternative investors remain a primary focus of SEC examinations. What has changed is not the substance of the risks, but the expectation that firms must be able to prove that their controls are active, tested, and aligned to current business practices. Operationalizing compliance is no longer a competitive advantage but an essential baseline requirement.
Firms that can demonstrate continuous, auditable control execution will be best positioned to navigate the 2026 exam cycle with confidence and reinforce trust with regulators and investors alike.
