SEC Sends ‘Critical’ Reminder on Hard-to-Value Private Assets - Bloomberg

SEC Sends ‘Critical’ Reminder on Hard-to-Value Private Assets Nicola M White Wall Street’s main financial regulator is spurring the financial industry to put more effort into valuing private assets as those holdings become harder to sell and investor redemption requests surge. The Securities and Exchange Commission staff statement issued on Monday, described as a “critical reminder” about existing requirements, doesn’t offer new rules. But it signals that the agency will be focused on how firms determine what their stakes are worth and how those values and risks are disclosed to investors.

The financial industry has been seeking to expand its private offerings to a wider audience, including individuals and retirement accounts. But investment returns have been hobbled by a backlog of unsold assets, forcing funds to hold stakes much longer and prompting doubts about whether some values might be overstated. Private credit managers have faced a relentless wave of redemption requests, with more than $14.5 billion of investor capital trapped at over a dozen funds as of midyear. The agency said “particular care” is needed for private credit because those markets are illiquid and some of the loans don’t have readily available price quotes. Private credit investments in registered funds have more than doubled since 2020, growing from $170 billion in December 2020 to $270 billion in December 2025, the SEC said.

The agency’s notice extends to auditors, urging those who vet financial statements to question the judgments of managers and ensure disclosures are robust enough. In times of market stress, it tells auditors to reconsider whether prior assumptions still hold up. “The complexity and judgmental nature of these fair value estimates, and their susceptibility to management bias, heighten the importance for auditors to exercise professional skepticism,” the SEC said. Clear disclosures about non-accrual and non-performing investments may be material to investors, as may information about the status of payment-in-kind interest, the notice states.

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