The exam division said it will review how advisers value hard-to-trade holdings and will focus on products that are illiquid or difficult to sell. The priorities are a signal of where scrutiny is heading, not a new rule.
The Securities and Exchange Commission has told private fund managers where its examiners will be looking next year.
The SEC's Division of Examinations released its priorities for fiscal 2027 on Oct. 23. They include investment advisers' fiduciary obligations and conflicts of interest, protection of retail investors in complex, higher-risk and illiquid products, and "private funds, private credit, and other complex investment strategies."
The division said it will review advisers' valuation processes and methodologies. It will also prioritize advisers that recommend products that are difficult to trade, unusual or illiquid. Loans made by private funds and business development companies are among the complex products in scope.
What exam priorities are
The list is a statement of where the agency's examiners plan to spend their time. It is not a new rule, it does not announce enforcement action, and it does not name any firm. But it shapes how managers prepare for exams, and it signals which issues the agency considers most pressing.
Why valuation is the focus
How private assets are valued has become one of the central questions in private markets. Unlike public stocks, private holdings have no daily price. Managers estimate their value using models, comparable transactions and periodic appraisals, and those estimates determine reported returns, fees and, increasingly, the prices at which investors can buy into or sell out of evergreen and semi-liquid funds.
The question is sharper because exits have slowed. When fewer companies are sold, fewer valuations are tested against real transactions. Not all the evidence points one way: a recent EDHEC study of exits by U.K.-listed investment trusts found that carrying values had understated eventual sale prices, by a median of about 20% for private equity deals.
The retail angle
The focus on illiquid products for retail investors comes as the industry pushes to sell private funds to individuals and as the SEC considers proposals to widen retail access to private markets. Exam scrutiny of how those products are recommended and valued sets a practical limit on how quickly that expansion can proceed.
Two readings
For managers with robust valuation practices, the priorities may simply mean more paperwork. Firms that can document how they arrive at their marks are less exposed.
For the industry more broadly, the list confirms that the growth of private credit and retail-facing private funds has drawn the regulator's attention. Managers that value similar assets differently, or that sell illiquid funds to individuals, should expect more questions.
What to watch
How exam findings are communicated over the coming year, the SEC's work on retail access to private markets, and whether managers change how they disclose valuation methods to investors.