SEC Trading Activity Monitoring for RIAs in 2026: What's Changed

In March 2026, StratiFi attended the IAA Annual Conference where the SEC's Division of Examinations presented their 2026 exam framework directly. The SEC exam priorities 2026, published November 2025, named dually registered advisers as a specific focus area for trading activity surveillance. Vanessa Horton, National Investment Adviser/Investment Company Program Director for the Division of Examinations, described her priorities in a framework of "buckets of three." The third bucket — Type of Firms — named dually registered advisers as a specific focus area for 2026 examinations.

Every law firm in the country published a bullet-point summary of the SEC exam priorities 2026 document. This post covers what the document alone doesn't tell you: what the SEC said in the room, what it means specifically for trading activity surveillance, and what a defensible compliance program looks like against that standard.

The shift in the 2026 exam cycle is not a new regulatory obligation — it is a change in what examiners ask for. The question is no longer whether firms have written policies. The question is whether those policies are being enforced — continuously, with documentation to prove it. For trading activity, that distinction is significant.

What the SEC's 2026 Exam Priorities Actually Say About Trading Activity

Vanessa Horton's Bucket 3 covers Type of Firms, and the first named category is dually registered advisers — firms that are registered both as investment advisers under the Advisers Act and as broker-dealers under the Exchange Act, with representatives who carry both licenses.

The specific concern Horton named is compensation structures creating undisclosed conflicts of interest. A dually registered adviser has advisors who can earn commissions on the BD side of their business. When those commission incentives influence trading decisions in accounts that are supposed to be managed under the fiduciary standard, the result is exactly the conflict the SEC is looking for in 2026 exams.

Corey Schuster, Co-Chief of the Asset Management Unit in the Division of Enforcement, appeared on the same panel. That combination — the examination director and the enforcement director, together — is itself a signal. Deficiency letters are being referred to enforcement at a higher rate. The traditional expectation that an exam finding results in a remediation plan and a follow-up exam is not the universal outcome it once was.

To understand the full regulatory framework that governs this — including how FINRA Rule 2111, Reg BI, and the fiduciary duty stack for hybrid firms — see our guide to FINRA Rule 2111 and excessive trading for RIAs and hybrid firms.

What's Changed Between 2025 and 2026

The shift from policy to evidence. Prior exam cycles focused heavily on whether firms had written policies and procedures. The 2023 amendment to Rule 206(4)-7 required that annual compliance reviews be documented in writing — a change that moved the standard from "conduct a review" to "prove you conducted a review." The 2026 exam cycle extends that logic to trading activity: it is no longer enough to have a WSP that says trading activity is monitored. Examiners expect to see the monitoring output.

Technology and automated trading now under surveillance. The 2026 priorities explicitly name AI and automated trading systems as an examination area. Firms using algorithmic rebalancing, automated tax-loss harvesting, or AI-assisted trading tools are expected to have adequate policies and procedures to supervise that activity.

The Reg S-P compliance deadline. Firms with $1.5 billion or more in AUM were required to comply with new written cybersecurity incident response program requirements by December 2025. Examiners will be checking this as part of 2026 exam cycles.

Merged and acquired firms named explicitly. When practices merge, compliance programs, documentation standards, and client records frequently do not align. Firms that have undergone acquisitions in the past 18–24 months face elevated exam risk.

The Trading Activity Surveillance Gap at Most Hybrid Firms

Understanding what the SEC is looking for makes the common failure modes immediately visible. Per the Core Compliance 2026 expectations analysis, regulators expect firms to demonstrate that compliance programs are operating as designed — not simply that the policies exist.

1. WSPs reference trading activity but define no thresholds or monitoring frequency. The policy says "excessive trading will be monitored." It does not say what constitutes excessive trading for this firm, what monitoring frequency is required, who performs the monitoring, or what happens when a threshold is breached. Vague language is not a compliance program.

2. Exception reports are produced monthly — examiners expect evidence of ongoing review. Monthly batch reporting tells an examiner that between report dates, no monitoring occurred. Continuous monitoring — with daily automated exception generation and regular review of the exception queue — is what the SEC's language about "ongoing" and "continuous" supervision actually requires.

3. Inactivity monitoring is absent. Most trading activity surveillance programs are built to detect over-trading. They have no mechanism for detecting accounts that are not being traded in the context of ongoing fee billing. For firms managing fee-based accounts, the absence of inactivity monitoring is a structural gap that leaves reverse churning entirely undetected.

4. The monitoring trail is in the supervisor's memory, not a documented record. A review that is not documented is, from an examiner's perspective, a review that did not happen.

5. Merged firm compliance programs have not been reconciled. The combined firm now has advisors whose activity spans both legacy programs, neither of which was designed for the combined structure.

What a Defensible Trading Activity Surveillance Program Looks Like in 2026

Step 1: Map your WSPs to your monitoring infrastructure. Every written procedure about trading activity must have a corresponding surveillance output. Gaps between written procedures and actual surveillance are deficiencies. Run this audit before an examiner does.

Step 2: Define thresholds in writing. Specify the turnover ratio ceiling, cost-to-equity maximum, inactivity lookback period, and minimum account size. For specific guidance on calibrating these numbers, see how to set trading activity thresholds for your RIA compliance program.

Step 3: Monitor both directions. Every monitoring cycle must produce two outputs: accounts flagged for potentially excessive trading, and accounts flagged for potentially insufficient activity in the context of ongoing fee billing.

Step 4: Document every exception end-to-end. The exception record should include: the date the flag was generated, the threshold breached, the account and advisor involved, the name of the supervisor who reviewed it, the review date, the outcome, and any notes.

Step 5: Run a mock exam on yourself. Once per year, simulate the document request an examiner would send. Attempt to produce: trade blotters, turnover analysis by advisor, WSPs with defined thresholds, exception reports, evidence that exceptions were reviewed. The gaps this exercise reveals are the gaps an examiner will find. This should be part of your proactive compliance supervision annual review cycle.

Staying Ahead of a Changing Examination Standard

The firms that perform best in SEC trading activity examinations are not the ones that respond best under pressure. They are the ones whose monitoring documentation is already complete before the examiner arrives.

For CCOs looking to build or strengthen trading activity surveillance ahead of the 2026 exam cycle, ComplianceIQ provides portfolio-aware monitoring and compliance intelligence mapped directly to what SEC examiners look for. The Trading Activity & Inactivity Monitoring module monitors every account against your configured thresholds daily, generates documented exception records, and produces the audit trail that makes examiner requests straightforward to respond to.

See how ComplianceIQ maps your trading activity surveillance program to what SEC examiners actually look for in 2026: Book A Demo.

Frequently Asked Questions

What are the SEC's 2026 exam priorities for RIAs?

The SEC's 2026 exam priorities include three "buckets": type of products (complex and volatile investments), type of clients (older investors and retirement savers), and type of firms (dually registered advisers, third-party account access, and merged/acquired firms). Trading activity surveillance falls primarily under the third bucket.

What does the SEC look for in trading activity during an exam?

Examiners typically request 12 months of trade blotters, turnover analysis by advisor and account, written supervisory procedures with defined thresholds, exception reports, and documented evidence that monitoring was actually performed.

What is a dually registered adviser and why do they face more scrutiny?

A dually registered adviser is a firm registered both as an investment adviser under the Advisers Act and as a broker-dealer under the Exchange Act. These firms face heightened scrutiny because their dual structure creates compensation conflicts: the same advisor may earn commissions on BD-side recommendations while operating under the fiduciary standard on the RIA side.

What written supervisory procedures are required for trading activity?

WSPs for trading activity should specify: the thresholds that trigger an exception (turnover ratio, cost-to-equity, inactivity period), the monitoring frequency, who performs the monitoring, what constitutes an escalation vs. a cleared exception, and how exceptions are documented.

How should RIAs document trading activity monitoring?

Every monitoring cycle should generate a documented record of exceptions reviewed, including: the flag date, the threshold breached, the account and advisor, the reviewer's name and review date, the outcome, and any notes.

What changed in SEC trading oversight between 2025 and 2026?

The primary shift is from policy existence to monitoring evidence. The 2026 priorities also added explicit focus on technology governance (AI and automated trading supervision), Reg S-P compliance, and merged/acquired firm compliance integration.