SEC Staff Urges Fair Value Rigor, Disclosure in Private Credit
The SEC's Chief Accountant and Investment Management staff issued a joint statement on fair value measurement and disclosure for private credit, a signal that scrutiny of illiquid asset valuations is intensifying.
Two SEC staff offices — the Office of the Chief Accountant and the Division of Investment Management — have jointly issued a statement on fair value measurement and disclosure considerations for private credit. The message to sponsors, advisers, valuation agents, auditors and fund boards is that a rapid build-out of privately placed loans, direct lending and related exposure has outpaced the consistency of pricing and disclosure practices supporting reported net asset value.
Why sophisticated counsel should care: private credit is now a core allocation for insurance, pension, sovereign wealth and hedge fund clients, and much of that paper sits on registered fund balance sheets. Risk is migrating from portfolio holdings to the valuation and disclosure apparatus around them. A staff statement changes no legal obligation, but it signals where examiners and enforcement attention is heading, and is a natural reference point in diligence on valuation policy, pricing sources, Level 3 governance, and board oversight.
Next steps: test whether client valuation and disclosure policies, board valuation committee charters, and third-party pricing arrangements match the statement's themes; expect administrators, auditors and valuation firms to adjust attestation and marketing language. Watch for follow-on staff guidance or rulemaking that would make this posture binding. The statement's issuance date and scope are unconfirmed in the source reviewed.