On September 28, 2026, the SEC’s Chief Accountant and Director of the Division of Investment Management issued a joint statement on fair value measurement and disclosure considerations for private assets. The statement creates no new requirements, but it sends a clear message about the SEC’s expectations as private assets become increasingly available to a broader investor base.
Private markets are becoming less private in one important respect: the investor base gaining exposure to them is expanding, and regulatory expectations around transparency are expanding with it.
The focus is particularly relevant to private credit. According to the SEC Staff, private credit investments held in registered fund portfolios increased nearly 60% between December 2020 and December 2025, from approximately $170 billion to $270 billion.
Unlike publicly traded securities, private credit instruments often lack readily observable market prices. Valuation therefore depends heavily on judgment, which creates governance, documentation, and disclosure obligations.
Private Credit Valuation: Why the SEC Expects More Than a Model
One of the Staff’s central messages is that limited information does not excuse an unreliable valuation process.
Borrower payment history, covenant compliance, and operating performance may all be relevant, but fair value must reflect the assumptions market participants would use. Depending on the asset, that may require consideration of broader credit spreads, liquidity conditions, comparable transactions, secondary-market indications, or relevant credit indices.
The SEC also emphasizes calibration. When transaction price represents fair value at acquisition, it provides an important reference point for subsequent measurements. Firms should be able to explain how and why assumptions change as market conditions evolve, and periodically compare model outputs against available market evidence.
This makes valuation as much a governance issue as an accounting matter. A defensible process should establish who owns the methodology, what information is reviewed, how assumptions are challenged, what triggers escalation, and how significant judgments are documented.
Regulators are increasingly focused not simply on whether firms have policies, but on whether their actual processes demonstrate effective governance and oversight.
Fair Value Disclosures: Explaining the Number
The other half of the SEC’s message is focused on transparency. For material Level 3 measurements, investors should receive meaningful information about the valuation techniques and significant unobservable inputs used. The Staff cautions against boilerplate or overly aggregated disclosure that obscures the assumptions actually driving reported values.
That principle extends to private credit characteristics such as restructurings, extensions, non-accrual status, and payment-in-kind (“PIK”) interest. A portfolio generating significant PIK income, for example, may recognize income without receiving corresponding current cash payments while increasing its exposure to the borrower.
The accounting may be correct while the headline number tells only part of the story.
The Staff similarly cautions against treating reported net asset value as an automatic answer for private fund interests. Although NAV may qualify as a practical expedient under ASC Topic 820, its use remains subject to applicable criteria and management judgment. As secondary markets for private investments develop, firms may also have access to market evidence that previously did not exist.
Private Credit Valuation Checklist for Your Firm
For firms with meaningful exposure to private credit or other difficult-to-value assets, the statement provides a useful opportunity to pressure-test the valuation lifecycle. Firms should consider whether:
- they receive sufficiently timely information;
- valuation models are periodically challenged against market evidence;
- significant assumptions and overrides are documented; whether governance and escalation responsibilities are clear; and
- investor disclosures adequately communicate the uncertainty and risks embedded in reported values.
Compliance teams should also consider the connections between valuation and the broader regulatory program. Valuation can affect performance reporting, fee calculations, investor communications, conflicts, portfolio reporting, and marketing. A weakness in valuation rarely remains isolated to valuation.
That connection is increasingly important as public and private markets converge. As we discussed in Expanding Offerings: The Public and Private Equity Intersection, adding private-market exposure is not simply a product decision. It introduces risks and operational requirements that existing compliance frameworks may not have been designed to address.
The Broader Signal
The SEC’s statement is ultimately about more than valuation methodology. It reflects a broader shift occurring as private assets move into structures reaching a wider population of investors.
Characteristics that make private assets difficult to value, such as illiquidity, bespoke terms, limited price discovery, and significant reliance on judgment, have not disappeared. What is changing is the level of transparency and governance expected around them.
For firms participating in that expansion, the objective is not to eliminate judgment. It is to make judgment defensible, documented, and transparent.
As private markets continue to evolve, firms should be prepared to demonstrate not only how they arrived at a valuation, but what information they considered, why their assumptions were reasonable, how those assumptions were challenged, and whether investors received enough information to understand the result.