SEC Statement Highlights Private Credit Valuation and Disclosure Challenges
CMRA examines the SEC staff's September 2026 statement on fair value measurement, model calibration, market evidence, and investor transparency.
How reliable are private credit valuations when observable market prices are limited?
On September 28, 2026, the SEC's Chief Accountant and Director of the Division of Investment Management issued a joint staff statement addressing fair value measurement and disclosure considerations for private assets, with particular attention to private credit.
The statement emphasizes the importance of disciplined valuation processes, market-participant assumptions, appropriate model calibration and transparent disclosures as private credit markets continue to expand.
Rather than creating new requirements, the statement reinforces existing principles under FASB ASC Topic 820 and applicable regulatory frameworks.
Private Credit Growth Increases the Importance of Valuation Discipline
Private credit assets are often individually negotiated, relatively illiquid, and not traded in active secondary markets. Their fair values may depend heavily on unobservable inputs, requiring significant judgment and careful consideration of available market evidence.
Four Key Valuation and Disclosure Considerations
The SEC staff identifies several areas requiring careful judgment when determining and reporting fair value for private credit and other illiquid assets.
Information Quality and Management Responsibility
Access to relevant borrower information is essential to sound valuation. Payment history, covenant compliance, operating performance and financial reporting may all affect fair value. A lack of timely information does not remove management's responsibility to estimate fair value appropriately.
Market Participant Perspective
Fair value estimates must reflect assumptions that market participants would use when pricing an asset. Internal borrower information should be evaluated alongside reasonably available market evidence, including prevailing credit spreads, comparable transactions and liquidity conditions.
Model Calibration and Ongoing Reassessment
When an initial transaction price represents fair value, it provides an important calibration reference. Subsequent model estimates should be reassessed using relevant market information and changing credit conditions. Calibration is an ongoing discipline, not simply an initial modeling exercise.
Transparency and Investor Disclosure
Disclosures should communicate material valuation techniques, significant unobservable inputs and the effect that changes in those inputs could have on fair value. The SEC staff also emphasizes relevant portfolio risk characteristics, including non-accrual loans, payment-in-kind interest, restructurings and other developments that may affect asset quality.
Valuation Credibility Depends on More Than Model Outputs
For investment managers, boards and auditors, the statement underscores the importance of disciplined judgment and evidence-based valuation procedures. A sophisticated pricing model cannot substitute for reliable inputs or appropriately supported assumptions.
The SEC staff also discusses the use of reported net asset value as a practical expedient in certain circumstances, as well as the importance of professional skepticism and sufficient audit evidence when evaluating fair value estimates.
U.S. Securities and Exchange Commission, Statement on Fair Value Measurement and Disclosure Considerations for Private Assets, September 28, 2026.
Read the SEC Staff Statement ↗