SEC Takes Two-Track Approach to Private Assets

For about $100 and two hours of multiple-choice questions, the average Joe could soon qualify to buy into private offerings. That is the premise of a FINRA-developed accredited investor exam the SEC is now considering. Anybody 18 or older could sit for roughly 75 questions, and a passing score would qualify an investor for accredited status for 10 years.

The exam is part of a package the Commission released on September 30 to promote the “responsible retailization” of private markets, currently reserved for those with a net worth north of $1 million or an income above $200,000 ($300,000 jointly). Proposed rules would let advisers charge performance fees to any accredited investor and to registered funds such as BDCs, a change the SEC expects will cause private-markets managers to offer more products designed for individuals. Another proposal would loosen repurchase scheduling for interval funds, one of the main ways non-accredited investors already reach private credit.

Even as it widens access, however, the SEC is taking a microscope to how these assets are valued. Two days before the proposals, the Office of the Chief Accountant and the Division of Investment Management published a staff statement on fair value for private assets. Private credit in registered fund portfolios grew from $170 billion at the end of 2020 to $270 billion at the end of 2025. Those loans rarely trade, so their value usually rests on Level 3 inputs—accounting shorthand for lots of assumptions and a good deal of judgment.

The statement asks funds and advisors to value private credit the way a market participant would, factoring in prevailing credit spreads and liquidity. It also warns against boilerplate disclosure and singles out payment-in-kind (PIK) interest, which lets a borrower cover interest by adding it to the loan balance instead of paying cash. The fund still books that as income, so a PIK-heavy portfolio can look healthier on paper than it does in cash.

For individual investors, this comes down to price. Interval funds and non-traded BDCs set their share prices from these valuations. If valuations run high, new investors could pay more than the assets’ underlying value would support. More than half of interval fund assets were classified as Level 3 at the end of 2025, according to figures cited by Simpson Thacher. If the performance-fee proposal is adopted, valuation practices could take on additional significance because those valuations may also affect adviser compensation.

Read side by side, the two releases could appear to send mixed signals about the SEC’s approach to private assets. One official had a hand in both: Investment Management Director Brian Daly co-signed the valuation statement and called performance fees “a defining characteristic of private funds.” Walt Whitman made a career out of “containing multitudes.” Daly might say the more relevant line comes from Spider-Man: “With great power comes great responsibility.”

In fact, the SEC’s two positions may be more complementary than contradictory. As access to private assets expands, the importance of rigorous valuation, transparent disclosure and appropriate controls grows with it. For funds and advisers, that means greater attention to how Level 3 assets are valued and documented, particularly when those valuations affect investor returns or adviser compensation. For investors, broader access may create new opportunities, but it also makes understanding how a fund arrives at its reported value increasingly important.

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