Key Takeaways
- • The SEC Division of Investment Management and Office of the Chief Accountant issued a September 28, 2026 staff statement, signed by Chief Accountant Kurt Hohl and Investment Management Director Brian Daly, reinforcing fair value discipline for private credit valuations, according to a Kroll commentary published September 29, 2026.
- • The staff statement is guidance rather than a new Commission rule, reminding registrants, boards, valuation designees and auditors of their obligations under existing accounting and regulatory frameworks.
- • Private credit investments within registered fund portfolios rose nearly 60% from December 2020 to December 2025, per the staff, raising the stakes for valuation quality and investor disclosure.
- • A performing loan does not by itself establish fair value; the required return a market participant would demand must reflect current conditions, liquidity and investment-specific risks.
- • The NAV practical expedient remains available only when its conditions are met, and using last reported NAV without adjustment for current conditions is inconsistent with FASB ASC Topic 820.
Summary
The SEC staff statement, issued September 28, 2026 by SEC Chief Accountant Kurt Hohl and Division of Investment Management Director Brian Daly, emphasizes that established fair value principles require rigorous application, informed judgment and meaningful disclosure in private credit. According to commentary from Kroll, the statement is not a new Commission rule but a reminder of registrants', boards', valuation designees' and auditors' responsibilities under applicable accounting and regulatory frameworks. The staff reported that private credit investments within registered fund portfolios increased nearly 60% between December 2020 and December 2025.
On the core valuation question, the staff stresses that fair value must reflect conditions at the measurement date and rely on information and assumptions market participants would use. A borrower's timely contractual payments are important credit evidence but do not by themselves establish fair value, since the return a market participant would require depends on current market conditions, liquidity, contractual protections and investment-specific risks. Fair value of private credit does not necessarily track public credit indices, though benchmarks such as the Kroll StepStone Private Credit Benchmarks offer objective information on fair value movements. Differences in seniority, covenants, collateral and maturity cannot be used to disregard market evidence.
The statement also addresses calibration. Where the transaction price represents fair value at initial recognition, techniques using unobservable inputs must be calibrated to that price and reassessed as conditions change. A model that keeps producing the original price despite meaningful changes in borrower performance or market return expectations requires investigation, as does a model that mechanically imports index movements without considering their applicability. The International Valuation Standards Council's July 2026 Perspectives Paper on private debt valuation, cited by Kroll, similarly addresses market evidence, yield and discounted cash flow approaches, and recovery approaches in distressed situations.
The staff also reminds managers that a lack of timely borrower information does not suspend valuation responsibilities. Frequent subscriptions and redemptions require more timely valuations, and where investors transact at NAV, an unsupported value can shift value among entering, exiting and remaining investors. Disclosure expectations are addressed as well: Material Level 3 disclosures should explain significant unobservable inputs and their uncertainty, and payment-in-kind interest, modifications, extensions, restructurings and non-accruals should be reflected in the interpretation of reported results.
Finally, the statement extends to investments in private funds. The NAV practical expedient is available only when its conditions are met, and the staff acknowledges that an expedient-based measurement can differ from the price achievable in a market participant transaction. A secondary-market discount does not automatically invalidate NAV, but reasonably available secondary-market information cannot be dismissed and must be evaluated and documented. Kroll's commentary frames the statement as a prompt for managers to confirm that inputs are current, market assumptions are supported and disclosures explain the economic substance of performance.
On the core valuation question, the staff stresses that fair value must reflect conditions at the measurement date and rely on information and assumptions market participants would use. A borrower's timely contractual payments are important credit evidence but do not by themselves establish fair value, since the return a market participant would require depends on current market conditions, liquidity, contractual protections and investment-specific risks. Fair value of private credit does not necessarily track public credit indices, though benchmarks such as the Kroll StepStone Private Credit Benchmarks offer objective information on fair value movements. Differences in seniority, covenants, collateral and maturity cannot be used to disregard market evidence.
The statement also addresses calibration. Where the transaction price represents fair value at initial recognition, techniques using unobservable inputs must be calibrated to that price and reassessed as conditions change. A model that keeps producing the original price despite meaningful changes in borrower performance or market return expectations requires investigation, as does a model that mechanically imports index movements without considering their applicability. The International Valuation Standards Council's July 2026 Perspectives Paper on private debt valuation, cited by Kroll, similarly addresses market evidence, yield and discounted cash flow approaches, and recovery approaches in distressed situations.
The staff also reminds managers that a lack of timely borrower information does not suspend valuation responsibilities. Frequent subscriptions and redemptions require more timely valuations, and where investors transact at NAV, an unsupported value can shift value among entering, exiting and remaining investors. Disclosure expectations are addressed as well: Material Level 3 disclosures should explain significant unobservable inputs and their uncertainty, and payment-in-kind interest, modifications, extensions, restructurings and non-accruals should be reflected in the interpretation of reported results.
Finally, the statement extends to investments in private funds. The NAV practical expedient is available only when its conditions are met, and the staff acknowledges that an expedient-based measurement can differ from the price achievable in a market participant transaction. A secondary-market discount does not automatically invalidate NAV, but reasonably available secondary-market information cannot be dismissed and must be evaluated and documented. Kroll's commentary frames the statement as a prompt for managers to confirm that inputs are current, market assumptions are supported and disclosures explain the economic substance of performance.
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