Detailing Important Examination Priorities For RIC's in 2025
For 2025, the Securities and Exchange Commission (SEC) has outlined its examination priorities for registered investment companies (RICs), including mutual funds and exchange-traded funds (ETFs). These priorities focus on ensuring that these funds operate in a transparent and compliant manner. The SEC’s Division of Examinations will concentrate on several key areas in its oversight of RICs.
1. Fund Fees, Expenses, and Related Waivers
One of the primary points of emphasis for the SEC in 2025 will be the fees and expenses charged by funds. The Division will examine how these fees are structured and whether any waivers or reimbursements are applied appropriately. This is critical because fund fees can have a significant impact on investors' returns, and the SEC aims to ensure that these fees are transparent, fair, and accurately disclosed.
2. Oversight of Service Providers
Investment companies often rely on various service providers, including both affiliated and third-party firms, to manage and support their operations. The SEC will scrutinize the oversight practices to monitor these service providers. Whether it involves custodial services, fund administration, or portfolio management, the SEC wants to ensure that funds exercise proper due diligence and oversight to protect investor interests.
3. Portfolio Management and Disclosures
The Division of Examinations will closely review portfolio management practices to ensure consistency between a fund’s stated investment strategy and its actual management. This includes examining whether the fund’s disclosures, marketing materials, and regulatory filings accurately reflect how the fund is being managed. If discrepancies are found, this could indicate that the fund is not being transparent with investors, which would be a serious concern for the SEC.
4. Handling Market Volatility
With recent global market fluctuations, the SEC is paying special attention to how investment companies handle market volatility. The Division will assess whether funds have adequate risk management strategies in place and if they are communicating the risks associated with market instability to investors clearly and effectively. This is particularly relevant for funds with exposure to more volatile asset classes, such as commercial real estate.
5. Compliance with New and Amended Rules
As the regulatory landscape evolves, RICs are expected to comply with new and updated rules issued by the SEC. In 2025, the Division will focus on how well investment companies adhere to these rules, ensuring that they have implemented appropriate policies and procedures. The SEC’s examinations will likely focus on areas such as fund marketing practices, portfolio disclosures, and risk management strategies related to evolving regulatory requirements.
6. Examinations of Newly Registered and Unexamined Funds
Similar to its approach with investment advisors, the SEC will prioritize examining investment companies that have never been examined or have not been examined in recent years. Newly registered funds will be of particular interest, as the SEC aims to ensure that these funds are meeting all regulatory requirements from the outset.
The SEC’s 2025 examination priorities for registered investment companies reflect its commitment to safeguarding retail investors and ensuring that RICs operate with integrity, transparency, and compliance. By focusing on fees, portfolio management practices, and adherence to new rules, the Division of Examinations seeks to promote investor protection and maintain the trust that individuals place in these investment vehicles.
For more information about examination priorities for investment companies in 2025, or to learn more about the SEC’s Division of Examination’s report for the upcoming year, browse our insights page or look through our resources.
