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Why US investment managers can no longer wing compliance

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Why US investment managers can no longer wing compliance

US investment managers expecting a more relaxed regulatory environment in 2026 may need to reconsider. Regulatory scrutiny remains focused on investor protection, fiduciary responsibilities and the effectiveness of compliance programmes, while evolving requirements around cybersecurity, artificial intelligence (AI) and data protection are adding to firms’ operational demands. For managers, the challenge is no longer simply having compliance policies in place, but demonstrating that their controls work in practice.

Leo RegTech argues that firms need to treat compliance as a core operational capability rather than an administrative obligation. Managing director US Janice Kioko highlights how fragmented processes and inadequate documentation can leave investment managers exposed as regulators increasingly expect firms to demonstrate that their policies, monitoring and governance arrangements are effective.

The appointment of Paul Atkins as chair of the Securities and Exchange Commission (SEC) has prompted some market participants to anticipate a softer regulatory approach. However, a greater focus on fraud and tangible investor harm should not be interpreted as an absence of scrutiny. The SEC’s Division of Examinations continues to prioritise retail investor protection, the fiduciary duties of registered investment advisers (RIAs) and the effectiveness of compliance programmes.

Published in November 2025, the Division’s fiscal 2026 examination priorities cover investment advisers, investment companies, broker-dealers and other registrants. Key areas include marketing, valuation, trading, portfolio management, disclosures, regulatory filings and custody. Conflicts of interest and documented standards of conduct also remain important, alongside emerging risks involving cybersecurity, due diligence and amended Regulation S-P requirements.

Investment managers should therefore be prepared to demonstrate that they maintain appropriate records, conduct regular compliance testing and verify that their controls operate as intended.


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