The agency wants to know more about the investor impact of advisors’ M & A deals, said Christine Schleppegrell, the former head of the SEC private funds branch( who is currently a partner at law firm Morgan Lewis). It’ s a notable shift, she said in an interview, adding that while the SEC has monitored consolidation before, now regulators want to know if these deals create operational risks, service disruptions or new conflicts that fall back on retail clients.

The exam teams will be looking closely for“ slippage” in how firms notify clients, integrate compliance and operations and monitor fee and performance impacts, she said.

The focus reflects the surge in RIA consolidation as firms look to buy or combine with other practices to expand their client base.“ We’ re seeing a very active space,” Schleppe- grell said.“ More firms are looking for opportunities to combine, and that momentum is drawing more attention from the SEC.”

She said client consent is a core issue in M & A exams. Examiners want to see how firms obtain it and how they communicate with clients about mergers.“ Timing and transparency matter,” she said. Regulators will also look at marketing tied to M & A to see whether firms overstate benefits or understate risks.

The SEC is also tightening its surveillance of conflicts, fees and the risks that emerge as advisors expand into new business models, she said.“ The SEC has been consistent. If an advisor is changing their model, moving into private markets or growing through M & A, regulators want to see that the conflicts are being addressed.”

On the product front, SEC examiners said they plan to review how firms weigh cost, liquidity, risk and product characteristics when making recommendations. They want to know whether advisors consider time horizon, volatility and exit costs and whether their disclosures square with their fiduciary duties. The SEC also plans to review whether firms are seeking best execution at the time trades occur.

High-cost and complex alternative products also continue to be a central focus of the agency. It plans to ask advisors more probing questions about private credit, private funds, leveraged ETFs, inverse ETFs and option-based ETFs— as well as products with unusually high commissions or expenses. The examination division said examiners will compare RIA and broker-dealer investment recommendations with investor profiles and disclosures. They will also pay special attention to advice given to older investors, private fund clients and separately managed account clients, according to the new priorities. The SEC said it also plans to review allocations and interfund transfers to determine whether private fund managers favor certain clients during volatile periods.

The division is also stepping up examinations of advisors entering the private fund space for the first time. Schleppegrell said private wealth firms are trying to offer clients access to private markets, often by forming feeder funds into larger vehicles. She said many of these advisors have never operated a private vehicle.“ If you’ re new to the private fund space, regulators expect a clear understanding of valuation, liquidity and the regulatory obligations that come with it,” she said.

Liquidity remains one of the biggest challenges for retail clients investing in alternatives, she said. Private equity funds may lock up capital for years. Schleppegrell said advisors must assess whether clients might need cash in the near term.“ Advisors need to ask whether the liquidity profile supports client goals,” she said.“ If a client needs money in short order, a long lockup can create real issues.”

Continued on page 10

DECEMBER 2025 | FINANCIAL ADVISOR MAGAZINE | 9