Outlining The SEC's Examination Priorities for Broker-Dealers in 2025
The Securities and Exchange Commission (SEC) has outlined its examination priorities for broker-dealers in 2025, with an emphasis on compliance with Regulation Best Interest, Form CRS obligations, financial responsibility rules, and trading-related practices.
The Division of Examinations can be expected to pay particular attention to how broker-dealers serve retail investors, examining how firms act in their customers' best interests and maintain transparency across their operations.
1. Regulation Best Interest
One of the top priorities for the SEC in 2025 is continuing its examinations of broker-dealer practices related to Regulation Best Interest. Regulation Best Interest, which was formally introduced in 2019 to enhance investor protection, requires brokers to act in their client's best interests when making recommendations about securities, products, investment strategies, or account types regardless of the financial interests of the firm. Documentation concerning each investor’s profile, including risk limitations, objectives, liquidity needs, time horizons, and experience will be expected to match recommended securities and portfolio strategies.
Such examinations will include a thorough review of how brokers disclose and manage conflicts of interest. Specifically, the SEC will focus on complex or high-risk products, such as highly leveraged or inverse products, cryptocurrency assets, structured products, and investments with opaque fee structures. The compensation and other financial interests that firms receive from these and similar sophisticated investment options should therefore be evaluated for sufficient mitigation and disclosure.
Examinations will also cover broker recommendations involving automated tools or digital platforms, as well as advice given to vulnerable groups, like older investors or those saving for retirement. Dual registrants—firms operating as both broker-dealers and investment advisers—will receive additional scrutiny, particularly in how they handle issues related to account selection, IRA rollover recommendations, and brokerage-to-advisory account transitions.
2. Form CRS
Form CRS, the Customer Relationship Summary, is another significant area of focus. Broker-dealers must provide this short, plain-language disclosure document to retail investors, explaining their services, fees, and conflicts of interest and revealing any disciplinary history.
In 2025, the SEC will review the content of Form CRS filings, ensuring that broker-dealers are transparent about the relationships and services they offer, their fee structures, and how conflicts of interest are managed. The Division will also examine whether broker-dealers are meeting their obligations to file these forms with the SEC and deliver them to retail customers on time.
3. Financial Responsibility Rules
The SEC’s examination priorities for 2025 also include assessing broker-dealers' adherence to financial responsibility rules. This includes compliance with the net capital rule and the customer protection rule, both of which are fundamental to maintaining financial stability and protecting client assets.
Broker-dealer examinations will review internal processes, procedures, and controls tied to financial reporting, focusing on how firms manage liquidity, credit, and market risk. The SEC will examine how well broker-dealers are prepared to handle market stress events and whether they have adequate operational resiliency, including supervision of third-party service providers contributing to their financial reporting.
4. Trading-Related Practices and Services
The SEC will continue to examine broker-dealers’ trading-related practices, particularly their equity and fixed-income trading services offered to retail customers. A key concern is whether broker-dealers are handling retail orders according to investor instructions and regulatory requirements. For instance, the SEC will review whether retail orders are marked correctly as “held” or “not held,” ensuring that the marking is consistent with client instructions.
The Division will also investigate the structure, marketing, and potential conflicts of interest in various broker-dealer offerings, such as bank sweep programs, fully-paid lending programs, and online trading platforms. Special attention will be paid to broker-dealer trading practices related to pre-IPO shares and the secondary sale of private company stock. Additionally, the pricing and valuation of less liquid instruments, such as municipal securities and non-traded real estate investment trusts (REITs), will be scrutinized.
The SEC will also enforce compliance with Regulation SHO, focusing on whether broker-dealers properly rely on the bona fide market making exceptions in short-selling activities.
In 2025, broker-dealers can expect a rigorous examination of their practices as the SEC remains committed to safeguarding retail investors and promoting transparency in the industry. The focus on Regulation Best Interest, Form CRS, financial responsibility, and trading-related activities highlights the need for broker-dealers to prioritize investor interests, manage conflicts effectively, and comply with financial and regulatory obligations. By aligning their practices with these SEC priorities, broker-dealers can ensure that they are operating in a compliant and ethical manner, reinforcing trust with their clients and regulators alike.
For more information about examination priorities for Broker-Dealers 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.
