SEC widens private fund scrutiny

The Securities and Exchange Commission is widening exam scrutiny of private fund advisers, with valuations, fees, disclosures, liquidity, and side letters back in focus. (sec.gov 1) (sec.gov 2) The shift is laid out in the SEC Division of Examinations’ 2026 priorities, released on November 17, 2025, under Chairman Paul S. Atkins and Acting Exams Director Keith Cassidy. The document says exam staff will prioritize newly registered advisers and other firms with heightened risk. (sec.gov 1) (sec.gov 2) For advisers that have not previously advised private funds, the SEC says exams may review “liquidity, valuation, fees, disclosures, and differential treatment of investors,” including the use of side letters. Those side letters are private deals that can give one investor better terms than another. (sec.gov) The SEC’s priorities are not new rules. The agency says the annual list is meant to show registrants and investors where examiners see higher risk in the coming fiscal year. (sec.gov) That distinction matters because the SEC’s 2023 private fund adviser rules were vacated by the U.S. Court of Appeals for the Fifth Circuit on June 5, 2024. The SEC’s private fund adviser page says those new rules, and related amendments, are no longer in effect. (sec.gov) Those vacated rules would have required quarterly statements with detailed fee, expense, and performance information, annual audits, and fairness or valuation opinions for adviser-led secondaries. They also would have restricted some preferential treatment and required disclosure of other side-letter terms. (sec.gov) The result is a narrower path for the agency: it cannot rely on the struck-down rule package, but it can still examine advisers for fiduciary duties, disclosure practices, valuation controls, and compliance programs under existing law. Law firms tracking the 2026 priorities say the SEC is extending long-running exam themes rather than launching a new rule regime. (sec.gov) (friedfrank.com) (akerman.com) Private credit is one reason the issue is getting sharper. ABF Journal reported on April 27, 2026 that Chairman Atkins said the SEC is monitoring “emerging pressures” in private credit, with valuation, transparency, and credit quality at the center. (abfjournal.com) ABF Journal also cited Bloomberg reporting that publicly traded private credit funds were trading at their deepest discounts to net asset value since 2022, while non-traded peers were facing more than $15 billion in redemption requests. Those are the kinds of conditions that make valuation methods and investor disclosures harder to ignore. (abfjournal.com) For private fund managers, the practical message is less about a fresh rulebook than a tougher exam file. Firms that cannot show how they price illiquid assets, allocate fees, and disclose side deals are more likely to spend time defending those judgments to SEC staff. (sec.gov 1) (sec.gov 2)