SEC Risk Alert Puts RIAs' Economic Conflicts Under the Microscope
The U.S. Securities and Exchange Commission's Division of Examinations (the “Division”) has once again made it clear that economic conflicts of interest remain a top examination priority for registered investment advisers (RIAs). In a Risk Alert published on June 9, 2026, the Division highlighted recurring deficiencies it continues to identify during examinations, providing firms with a roadmap of the areas examiners are reviewing most closely.
While the observations are not new regulations, they serve as an important reminder that advisers must be able to identify, disclose, and manage conflicts that could influence investment recommendations or other client decisions. For many firms, now is a good time to evaluate whether existing disclosures, policies, and testing procedures accurately reflect how the business operates today.
What the SEC Is Looking At
The Risk Alert focuses on economic incentives that could influence an adviser's recommendations. These include compensation arrangements, revenue-sharing agreements, fee structures, affiliate relationships, and other financial benefits that may affect the advice clients receive.
As fiduciaries, RIAs are expected to either eliminate these conflicts or provide clients with full and fair disclosure so they can make informed decisions. The SEC continues to find instances where firms either failed to disclose conflicts adequately or maintained disclosures that did not accurately reflect their business practices.
Five Common Deficiencies Identified by the SEC
1 | Inadequate conflict disclosures: Examiners found that many advisers used language stating they "may" receive certain compensation or financial benefits when, in reality, those arrangements were already in place. According to the Risk Alert, disclosures should reflect actual business practices rather than hypothetical scenarios. Firms should regularly review their disclosure documents to ensure they accurately describe existing conflicts and provide clients with sufficient information to understand how those conflicts could influence the advice they receive.
2 | Cash management arrangements: Examiners identified deficiencies related to cash sweep programs and other cash management practices where advisers received revenue-sharing payments or other financial incentives. In many cases, firms did not fully explain these arrangements or disclose how they could influence recommendations regarding custodians or cash management products. The SEC also noted instances where firms failed to clearly explain how advisory fees applied to uninvested cash balances.
3 | Share class recommendations: Examiners continue to focus on whether advisers are recommending mutual fund share classes that generate additional compensation without adequately disclosing those financial incentives. Examiners also reviewed whether firms evaluated lower-cost share class options that may have been available to clients. RIAs should have documented processes for selecting share classes and ensuring recommendations are made in clients' best interests.
4 | Form ADV inconsistencies: The Risk Alert identified numerous examples where Form ADV disclosures did not accurately reflect a firm's current business operations. In some cases, descriptions of compensation arrangements, brokerage practices, or affiliated relationships were incomplete or inconsistent with advisory agreements and internal policies. Regular reviews of Form ADV can help ensure disclosures remain aligned with how the firm actually operates.
5 | Fee billing errors: Examiners also continue to identify deficiencies in advisory fee billing practices. These included calculating fees in ways that differed from client agreements, failing to apply negotiated fee discounts or breakpoints, and continuing to bill clients after advisory relationships had ended. Periodic testing of fee calculations and billing processes can help firms identify errors before they become examination findings or client issues.
Practical Steps RIAs Should Take
In light of the Risk Alert, advisers should consider reviewing several areas of their compliance program:
Confirm that Form ADV disclosures accurately reflect current compensation arrangements, affiliations, and conflicts.
Review client agreements, marketing materials, and internal policies for consistency.
Evaluate cash management, revenue-sharing, and share class selection practices.
Test advisory fee calculations and billing procedures to identify errors before regulators do.
Review compliance policies to ensure they address how conflicts are identified, disclosed, monitored, and documented.
Conduct periodic reviews as business practices evolve rather than waiting for an SEC examination.
Regular compliance reviews can help identify gaps before they become regulatory issues and demonstrate that the firm maintains an active, risk-based compliance program.
How Pillar Compliance Group Can Help
The SEC's latest Risk Alert serves as a practical checklist for firms preparing for future examinations. While every RIA's business model is different, firms should ensure that their disclosures, policies, procedures, and day-to-day operations remain aligned.
Pillar Compliance Group works with investment advisers to evaluate compliance programs, review regulatory disclosures, test policies and procedures, and prepare for SEC examinations. Proactively addressing these areas today can reduce regulatory risk and strengthen your firm's overall compliance program before examiners arrive.