SEC Officials Address Fair Value Rules for Private Assets

The Securities and Exchange Commission's Chief Accountant Kurt Hohl and Brian Daly, Director of the Division of Investment Management, issued a joint statement addressing fair value measurement and disclosure considerations specific to private assets, signaling heightened regulatory attention to how investment funds value illiquid holdings.

The statement comes as private markets have expanded significantly, drawing a broader base of retail and institutional investors into vehicles that hold assets not traded on public exchanges. Valuing such holdings presents distinct challenges compared to publicly traded securities, where market prices provide a continuous and observable benchmark.

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Regulators have long scrutinized the methodologies funds use to arrive at net asset values for private credit, private equity, and other alternative assets, since inconsistent or optimistic valuations can mislead investors about the true risk and performance of a portfolio. The joint statement from two senior SEC officials underscores that both the accounting and investor-protection arms of the agency are aligned on the issue.

Fair value measurement under U.S. accounting standards requires funds to estimate what a market participant would pay in an orderly transaction, a standard that becomes harder to apply when comparable market data is limited or stale. Disclosure requirements are intended to give investors transparency into the assumptions and inputs underlying those estimates.

The coordination between the Office of the Chief Accountant and the Division of Investment Management suggests the SEC may be laying groundwork for future guidance, examination priorities, or rulemaking targeting private asset valuation practices. Continue reading at Speeches and Statements.