United States: Show Me the Money: SEC Risk Alert Highlights Advisers’ Economic Conflict

By: Thoreau Bartmann, Jennifer Klass, Pablo Man, and Keri Riemer

On 9 June 2026 the SEC Division of Examinations published its second risk alert since Atkins became chair. The Risk Alert reminds investment advisers of their fiduciary obligation to disclose economic conflicts of interest that might cause advisers and their financial professionals to recommend certain products, services, or account types. Citing the SEC’s fiduciary interpretation from 2019 and longstanding examination priorities, the Risk Alert identifies the following areas of concern:

• Cash management programs: Advisers recommended cash sweep programs, including those offered by affiliated banks, without disclosing revenue received in connection with those recommendations, including revenue sharing tied to client cash balances in bank deposit sweep programs or incentives to recommend higher cost (or lower interest) sweep vehicles.
• Share class selection: Advisers failed to disclose that lower cost share classes of the same funds were available to clients, while recommending higher cost classes that generated revenue for the advisers or affiliated brokers.
• Disclosure of other economic benefits: Advisers did not adequately disclose (in Form ADV or otherwise) economic benefits available to them from custodial credits, margin loans and credits, and marking up fees charged by clearing brokers. In general, Item 10 of Form ADV Part 2A should address material compensation arrangements with affiliates and Item 12 should disclose factors considered in selecting broker-dealers (e.g., revenue share).
• Fee billing errors: The staff observed that advisers charged asset-based fees on excluded assets, billed inactive accounts, assessed incorrect fee rates or did not apply reduced asset-based fee rates for cash and fixed income assets (such as by not householding accounts for fee rate breakpoints), did not rebate certain transaction fees, and/or did not refund unearned fees.
• Compliance program deficiencies: Advisers lacked written policies and procedures adequate to prevent billing errors and had insufficient controls to monitor the accuracy of fee calculations and the issuance of rebates.

The Risk Alert follows several enforcement actions against investment advisers involving economic conflicts of interest and fee billing practices, and it is consistent with our observation and experience that conflicts of interest will continue to remain an exam priority in 2026.