Q2 2026 Compliance Trends | Vigilant Insights

Vigilant Insights

Introduction

Q2 2026 continued to reinforce a familiar message from regulators: Firms must demonstrate that their compliance programs are effective in practice, particularly in areas involving investor protection, fiduciary duty, cybersecurity, fees and conflicts, and private fund oversight.

During the second quarter, Vigilant’s coverage highlighted several areas receiving increased regulatory attention. The SEC’s amended Regulation S-P requirements became applicable to RIAs with less than $1.5 Billion in AUM on June 3, while SEC Compliance Outreach Programs provided additional insight into examination priorities and common deficiencies. The SEC also continued to focus on fee billing, conflicts of interest, private fund practices, personal trading, and compliance program effectiveness.

At the same time, emerging areas such as Artificial Intelligence (“AI”) are creating new compliance considerations for RIAs, while changes to Form PF and evolving SEC enforcement priorities demonstrate that Firms should remain prepared to adapt their compliance programs as regulatory expectations develop.

In this Vigilant Insights release, we cover compliance trends we have seen throughout Q2 2026, and they can be found below.

Compliance Trends (Q2 2026)

1. Reg S-P & Cybersecurity Readiness

One of the most significant Q2 developments was the June 3, 2026, compliance deadline for RIAs with less than $1.5 Billion in AUM under the SEC’s amended Regulation S-P.

The amendments strengthen requirements surrounding the protection of nonpublic personal information, incident response, and notification of affected customers following certain data breaches.

Vigilant’s Q2 coverage also emphasized that cybersecurity threats continue to affect Firms of all sizes, making operational preparedness increasingly important.

Firms should focus on:

• Maintaining a formalized incident-response program.
• Establishing procedures to detect, respond to, and recover from unauthorized access to customer information.
• Understanding the Firm’s obligations following a qualifying data breach.
• Evaluating cybersecurity safeguards and Third-Party Service Provider risks.
• Regularly reviewing and testing cybersecurity and incident-response procedures.

2. AI Requires Governance, Oversight & Accurate Disclosure

AI continued to emerge as an important compliance consideration for RIAs in Q2.

AI is increasingly being incorporated into portfolio management, client communications, trading analytics, and compliance monitoring. However, the use of AI does not change an RIA’s existing fiduciary and compliance obligations.

Firms considering or implementing AI should focus on:

• Understanding how AI tools function and documenting how they are used.
• Establishing testing, validation, and monitoring procedures.
• Protecting client information and confidential data.
• Conducting appropriate due diligence on third-party AI providers.
• Evaluating whether AI-generated information should be retained as part of the Firm’s books and records.
• Reviewing AI-generated marketing materials and communications for accuracy.
• Evaluating whether disclosures appropriately describe the Firm’s use of AI.

The regulatory consideration is not simply whether a Firm uses AI, but whether the Firm has appropriate controls surrounding its use and whether its disclosures accurately reflect what the technology actually does.

3. Private Fund Compliance, Fees & Financial Transparency

Private Fund Advisers remained an important area of SEC focus throughout Q2.

In April, the SEC filed an enforcement action against a Private Fund Investment Adviser and its Principal involving allegations of excessive management fees and material misrepresentations to investors and prospective investors. The SEC alleged that more than $515,000 in management fees were paid in violation of the Fund’s governing documents and that required audited and unaudited financial information was not provided.

The SEC and CFTC also proposed amendments to Form PF intended to reduce reporting burdens. Among other changes, the proposal would increase the Private Fund AUM threshold for smaller advisers from $150 Million to $1 Billion and increase the threshold for “large” Hedge Fund Advisers from $1.5 Billion to $10 Billion.

Together, these developments demonstrate that Private Fund Advisers should continue to pay close attention to:

• Management fees and expenses being charged in accordance with governing documents.
• Investor disclosures and representations.
• Audited and unaudited financial reporting requirements.
• Custody and related requirements.
• Form PF filing requirements and applicability.
• The Firm’s ability to demonstrate effective oversight of Private Fund activities.

4. Fiduciary Duty, Conflicts & Fee Practices Remain a Core Focus

Q2 continued to demonstrate that fiduciary duty and conflicts of interest remain central areas of regulatory scrutiny.

The SEC’s June Risk Alert identified deficiencies involving fee billing practices, compensation arrangements, and conflicts of interest disclosures. Examples included revenue sharing, sweep account arrangements, 12b-1 fees, and relationships involving clearing brokers, margin lending, and custodial arrangements. The SEC also identified billing errors involving incorrect fee rates, fees charged to inactive or terminated accounts, calculation errors, and failures to apply agreed-upon fee reductions or rebates.

Enforcement activity during the quarter further reinforced these concerns. In June, the SEC announced settled charges against an RIA and its former CEO involving alleged breaches of fiduciary duty, undisclosed conflicts of interest, personal trading, and compliance program deficiencies. The settlement totaled more than $1.5 Million in combined disgorgement, prejudgment interest, and civil penalties.

For RIAs, Firms should consider whether they are:

• Regularly reviewing fee calculations and billing practices.
• Confirming that billing practices are consistent with advisory agreements and disclosures.
• Identifying and appropriately addressing economic conflicts of interest.
• Reviewing compensation and revenue-sharing arrangements.
• Maintaining appropriate policies and procedures surrounding personal trading.
• Testing whether compliance policies and the Code of Ethics are actually being implemented and enforced.

5. SEC Examinations Are Providing Greater Insight Into Areas of Regulatory Focus

The SEC’s 2026 Compliance Outreach Programs held in Atlanta and New York during May and June provided additional insight into the areas being emphasized by the SEC’s examination staff.

The programs addressed examination priorities, common deficiencies, Regulation S-P implementation, fiduciary obligations, Private Fund examinations, and compliance program expectations.

The Q2 developments also demonstrated that examination and enforcement attention extends across multiple areas, including:

• Private Fund fees and expenses.
• Conflicts of interest.
• Custody and annual audit requirements.
• Compliance program effectiveness.
• Fiduciary obligations.
• Cybersecurity and Regulation S-P.
• Personal trading.
• Books and records.

For Firms, this reinforces the importance of conducting meaningful compliance testing and documenting the results rather than simply maintaining policies and procedures.

6. Enforcement Priorities Continue to Emphasize Investor Protection & Actual Harm

The SEC’s Q2 enforcement developments also provided insight into the Commission’s approach to enforcement.

In remarks at the MFA Legal & Compliance 2026 Conference, David Woodcock, Director of the SEC Division of Enforcement, emphasized the SEC’s mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. He also stated that the Division would remain focused on conduct causing real harm to investors and markets.

Q2 enforcement matters involving Private Fund fees, Reg BI, personal trading, fiduciary duty, conflicts, compliance programs, and custody demonstrate that Firms should not view compliance as simply satisfying technical requirements.

Instead, Firms should evaluate whether their policies, procedures, supervisory processes, and testing programs are effectively identifying and addressing risks that could cause harm to clients or investors.

How Vigilant Compliance Can Help

Q2 2026 demonstrates that Firms continue to face a broad range of compliance responsibilities, from cybersecurity and data protection to fiduciary duty, fee billing, Private Fund oversight, AI governance, and regulatory examination preparedness.

With regulators continuing to emphasize effective compliance programs, Firms should consider whether their existing policies and procedures adequately address their current business activities and whether they can demonstrate that those controls are operating effectively.

Vigilant supports Firms by bridging the gap between regulatory expectations and day-to-day execution. Through hands-on Compliance Services, Vigilant helps Firms:

• Assess and enhance Regulation S-P, cybersecurity, privacy, and incident-response programs.
• Review fee billing practices, conflicts of interest, and related disclosures.
• Strengthen Private Fund compliance programs, including fee and expense oversight and regulatory reporting.
• Develop and implement AI governance and supervisory controls.
• Conduct compliance testing and Annual Reviews designed to identify and remediate potential deficiencies.
• Prepare for SEC Examinations through Mock Exams and targeted compliance reviews.
• Evaluate and strengthen books and records, policies, procedures, and supervisory controls.

As regulatory expectations continue to evolve, Firms that proactively evaluate their compliance programs and demonstrate effective oversight will be better positioned to navigate examinations and mitigate compliance risk.

Vigilant provides the expertise and support needed to help Firms stay ahead, helping make sure their compliance programs are not only compliant, but practical, effective, and adaptable in an evolving regulatory landscape.

Schedule a call with our team today to learn more about our Solutions and how we can help.

Contact Us