The statement offers insight into the SEC staff’s current views regarding private credit and other illiquid and hard-to-value assets.

On September 28, 2026, Securities and Exchange Commission (SEC) Chief Accountant Kurt Hohl and Division of Investment Management Director Brian Daly issued a staff statement (Statement) reminding management, boards, valuation designees and auditors of existing fair value measurement and disclosure requirements applicable to private assets, particularly private credit.¹ While the Statement focuses on registered closed-end funds, interval funds, tender offer funds, business development companies (BDCs), and private funds registered under the Securities Exchange Act of 1934 (collectively, funds), the principles in the Statement apply to all private funds. Although issued by the Office of the Chief Accountant and the Division of Investment Management, the Statement may also inform the approach of the Divisions of Examinations and Enforcement. Notably, private credit valuation presents issues of overlapping interest to both the Asset Management Unit and the newly formed Financial Reporting and Accounting Unit, a convergence that makes increased SEC Enforcement scrutiny of private credit valuation practices and related disclosures more likely.

The SEC staff is signaling that funds with exposure to private credit and other hard-to-value assets should be prepared to demonstrate not simply that they have a valuation process but why that process produces reasonable results in light of current market information. The Statement does not create new obligations; it brings together existing accounting and regulatory expectations in a way that provides a useful road map for how SEC staff may evaluate valuation processes, governance and disclosures involving private assets. For funds and advisers, the SEC staff’s practical message is straightforward: Valuation judgments should be supportable, documented, tested against available market evidence and accurately reflected in investor disclosures. This alert summarizes the Statement, discusses relevant enforcement actions and offers practical considerations for funds with direct or indirect private credit exposure.

Key Takeaways

·       Private Credit Remains an Area of Regulatory Interest

The Statement comes as private credit exposure continues to expand across registered and private fund portfolios. The global private credit market has reportedly reached approximately $3.5 trillion in assets under management.² The Statement itself further notes that within registered fund portfolios, private credit investments grew nearly 60%, from approximately $170 billion in December 2020 to $270 billion in December 2025.

The Statement notes that private credit assets are typically illiquid and lack readily available market prices. Valuation therefore requires management to select appropriate valuation methods and information and weigh competing assumptions. The Statement describes the staff’s expectations of tailored valuation policies and procedures, as well as disclosures of the resulting estimates and any uncertainties.

·       Valuations and Market Participant Assumptions

The Statement indicates that, under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, fair value should reflect market assumptions, including current credit spreads, liquidity conditions and the return a market participant would require to bear the investment’s risks.

·       Information Quality and Calibration

When estimating fair value, the Statement describes the importance of detailed and timely borrower and market information, as well as periodic comparisons of model results against available market evidence, including comparable transactions, public market equivalents, secondary market indications and relevant credit indices.

·       Disclosures of Fair Value Measurement

The Statement describes expected disclosures of material valuation techniques, significant inputs and sensitivity to changes in those inputs, and it warns against boilerplate or overly aggregated disclosure.

·       Transparency of Credit Quality

The Statement highlights best practices for disclosures of the overall risk profile of private credit portfolios, including the importance of disclosures concerning developments related to private credit assets, nonaccrual and nonperforming investments, and payment-in-kind (PIK) interest.

·       Iterative Analysis of the Use of Net Asset Value (NAV)

To determine whether the conditions for using NAV as a practical expedient under FASB guidance are satisfied, the Statement encourages an iterative, evidence-based assessment that considers reasonably available information, including developments in secondary markets for private fund interests. The Statement emphasizes that assessing a private fund’s reported NAV requires professional judgment and consideration of all reasonably available information. The staff noted that although registrants often rely on information obtained from fund managers through initial due diligence and ongoing monitoring, they should also consider other available information, including information that may emerge as the secondary markets for private fund interests continue to develop.

·       Role of Auditors, Boards and Valuation Designees

Citing the “complexity and judgmental nature of these fair value estimates, and their susceptibility to management bias,” the staff emphasized auditors’ role in evaluating private credit asset valuations. According to the staff, auditors must exercise professional skepticism in gathering and evaluating audit evidence related to the fair value estimates, which includes assessing external factors, such as industry and market conditions, and obtaining persuasive evidence that tests management’s valuation assumptions.

The Statement also reflects the staff’s view that boards and valuation designees should understand the valuation framework and its application, including how material information about the process and related judgments is communicated to investors.

Recent SEC Enforcement Actions and Examination Priorities Provide Context for Potential Risks

Although framed as accounting and disclosure guidance, the Statement reflects the SEC’s continued interest in private markets, private credit, valuation governance and liquidity-related disclosure. That emphasis is also consistent with the Division of Examinations’ Fiscal Year 2025 Examination Priorities, which identified private credit, illiquid and difficult-to-value assets, valuation, and the consistency of private-fund disclosures with actual practices as areas of focus.³

Recent Enforcement matters also illustrate circumstances in which the staff has raised concerns regarding valuation policies and procedures, reliance on third-party pricing services and the exercise of management judgment. SEC orders finding negligence-based fraud against advisers in the valuation context have often rested on the failure to adhere to disclosed valuation methodologies, rather than on a determination that the resulting valuations themselves were incorrect. The Statement suggests that Enforcement may continue to focus on valuation-related disclosures. For advisers, the long-standing mantra remains: Say what you do, and do what you say.

·       Tailored and Specific Valuation Policies and Procedures

In one 2023 settlement, the SEC found that private-fund advisers failed to adopt and implement reasonably designed valuation policies and procedures for funds investing principally in private equity, debt and other assets without readily available market prices.⁴ The SEC did not allege that the assets were mismarked; rather, the violations were based on allegations that the adviser’s written policies and procedures were not reasonably designed in light of the nature of the investment mandates of the funds and gave only minimal guidance regarding how to value the investments in accordance with Generally Accepted Accounting Principles (GAAP) and other standards set forth in the funds’ offering documents. For example, the staff alleged the compliance manual did not mention any valuation techniques or methodologies and, further, lacked procedures designed to promote consistency in the valuation process and to reduce the potential conflicts of interest arising from the role of the advisers in valuing investments they acquired and managed for the funds. The respondents agreed to a $275,000 civil penalty and an independent compliance-consultant undertaking.

·       Limitations of Third-Party Pricing

In a 2024 matter, the SEC found the adviser overvalued approximately 4,900 largely illiquid collateralized mortgage obligation positions by using third-party prices intended for institutional-sized lots,⁵ even though the positions were smaller “odd lots” that traded at discounts, when their pricing service did not provide separate valuations for odd lots. The firm agreed to pay $79.8 million in connection with the valuation and related cross-trading charges. The SEC emphasized in its press release: “Utilizing a third-party pricing service does not negate an investment adviser’s obligation to value assets accurately.” This maps closely to the new Statement’s focus on information quality, market participant assumptions and corroboration of model outputs against available market evidence.

·       Valuation of Hard-to-Value Assets and Management Discretion

In a series of related matters against numerous respondents, the SEC alleged that the adviser’s CIO manipulated valuation models and inputs for illiquid assets, inflating the reported NAVs of a mutual fund and a private fund by more than $1 billion. In addition to charging the CIO, the SEC also charged the adviser,⁷ its CCO,⁸ the mutual fund⁹ and its auditor,¹⁰ illustrating that valuation failures can expose multiple participants when controls, oversight or purportedly independent checks do not constrain management discretion.

These matters also illustrate the range of issues the staff may examine when reviewing the valuation process for illiquid and hard-to-value assets, including the methods and inputs used, whether there was potentially contradictory evidence available and the operation of independent review. These matters also reflect that, depending on the circumstances, valuation issues may implicate financial reporting, marketing materials, reported performance, fees, redemption decisions, and compliance and oversight processes.

Practical Considerations

The Statement, recent SEC enforcement actions and the examination priorities provide insight into questions the staff may ask about the valuation of illiquid assets. Depending on a registrant’s facts and circumstances, those questions may concern the design and operation of the valuation process, the basis and documentation for significant judgments, the nature of oversight, and whether disclosures appropriately describe material valuation matters.

In light of these developments, funds may wish to consider whether any of the following steps would be appropriate in view of their particular structures, investments and existing practices:

• Assessing whether written valuation policies and procedures, governance arrangements and board or valuation-designee oversight appropriately reflect the registrant’s portfolio and valuation practices.
• Considering whether calibration methodologies and related documentation adequately explain significant judgments in light of the information reasonably available at the time.
• Evaluating whether contemporaneous records sufficiently explain material valuation outcomes, including the reasoning, assumptions and alternatives considered.
• Considering whether valuation assumptions appropriately account for relevant liquidity conditions and available market-based evidence.
• Reviewing how the registrant uses and oversees third-party pricing services and valuation consultants, including whether its process provides for an appropriate assessment of external inputs.
• Assessing whether existing disclosures appropriately address material valuation matters and portfolio developments, which may include nonaccrual or nonperforming investments, PIK interest and developments affecting private credit assets.
• Considering whether the basis for using NAV as a practical expedient and the information considered in that assessment remain appropriate.
• Considering how existing records would explain the registrant’s valuation governance, liquidity assessments and disclosure controls if questions arise during an examination or investigation.