SEC Risk Alert on Investment Adviser Economic Conflicts of Interest: A Silver Linings Playbook for Improvement

On June 9, 2026, the SEC issued a risk alert highlighting examination observations related to investment advisers’ obligations to identify, disclose, and manage economic conflicts of interest. By discussing past deficiencies, the alert serves, in effect, as a “silver linings playbook.” Like a football team that studies its performance after a bad game or ballroom dancers who practice their routine with discipline, advisers who attend to the SEC’s observations not only will improve the chances of a winning outcome in their next exam but also will better serve their clients.

The alert highlights deficiencies involving cash management recommendations, revenue-generating arrangements, fee calculations, disclosures, and compliance programs. For example, the spotlighted disclosure missteps found by the SEC often related to cash management and sweep programs where advisers or affiliates received financial benefits. The SEC also observed issues involving revenue-sharing, share-class selection, and compensation structures, creating incentives that were not adequately disclosed.

Nevertheless, the alert provides a game tape of the foot faults others have had that can help protect clients and secure advisers’ regulatory compliance.

Key Takeaways

• Conduct comprehensive inventories of economic conflicts and compensation arrangements, and then review disclosure adequacy.
• Evaluate cash sweep, cash management, and revenue-sharing arrangements for conflicts and disclosures.
• Verify that advisory fees are calculated and billed in accordance with agreements and disclosure.
• Periodically test conflict-management and fee controls.
• Strengthen supervisory procedures, as needed.

Like a football game or a ballroom dancing competition, chances of success are maximized by planning future moves, and the SEC alert is a useful new tool for this purpose. If advisers remain disciplined, in step with regulatory expectations, and transparent, they can find their silver lining.