SEC Sharpens Focus on AI, Emerging Tech in 2025 Exams
The U.S. Securities and Exchange Commission (SEC) has unveiled its 2025 market participant examination plan. The regulator aims to tighten oversight of modern technologies and enhance investor protection against unscrupulous practices.
The SEC’s Division of Examinations will focus on monitoring financial firms’ adherence to fiduciary duties owed to their clients. Particular attention will be paid to recommendations involving:
- high-risk products,
- unconventional instruments,
- illiquid assets,
- instruments sensitive to interest rate fluctuations.
Broker-dealers will undergo a detailed review of their Form CRS. The regulator will assess how companies:
- describe their services to retail clients,
- disclose fees and costs,
- explain potential conflicts of interest,
- report any disciplinary infractions.
The SEC will also prioritize cybersecurity among market participants. The Commission will verify compliance with Regulations S-ID and S-P, as well as recently adopted rules that reduced the settlement cycle for most securities to a T+1 format.
For the first time, the organization will take a serious look at cutting-edge technologies. It intends to carefully examine how firms are incorporating automated investment tools, artificial intelligence, and trading algorithms. Additionally, it will assess the risks associated with the use of unconventional data sources.
The SEC’s Whistleblower Program will assist in uncovering violations. Anyone can anonymously report how companies are breaching securities laws and may receive financial rewards for doing so.
Compliance officers have also been given a unique opportunity to participate under special conditions. Typically, employees involved in compliance or internal audit are not permitted to engage in the program. However, under the “120-day rule,” a compliance officer can report a violation if they first raise the issue internally and wait 120 days before approaching the Commission.
Since the SEC cannot annually examine every organization under its jurisdiction, whistleblowers serve as invaluable allies in identifying and preventing misconduct.
Potential whistleblowers are advised to consult with attorneys familiar with the intricacies of the SEC Whistleblower Program before coming forward.
