By: Matt Calabro
The private credit market has entered a new phase of attention. Following several high-profile bankruptcies, including First Brands Group in September 2025, regulators and investors alike are asking the same question: is systemic risk growing, or are these isolated failures?
What’s clear is that the sector’s rapid expansion — over $1 trillion in AUM growth over the last decade — has caught the SEC’s eye. The growth of private credit funds and business development companies (BDCs) has been driven by tighter bank lending standards and strong investor appetite for diversification and yield. But scale brings scrutiny.
Regulators Are Watching
In its 2025 Examination Priorities, the SEC’s Division of Examinations called out private funds for closer review, specifically around fee calculations, valuation practices, and the adequacy of investor disclosures during periods of volatility.
Whenever systemic risk rises, regulators respond by examining the foundations — governance, controls, and transparency. In the case of private credit, that focus will likely extend to:
- Valuation policies and procedures
- Credit monitoring and lending standards
- Investor disclosures and marketing materials
- Information barriers between public and private strategies
- Governance frameworks and risk controls
How Advisers Should Respond
Advisers to private credit funds and BDCs should act now to reinforce the fundamentals. Policies and procedures around credit monitoring, lending standards, and valuation should be current, defensible, and fully documented. Investor disclosures must clearly describe risks, especially during market shifts or rate changes.
Regulatory reviews don’t just test compliance programs — they test confidence. Firms that can demonstrate disciplined valuation practices, robust internal controls, and well-documented oversight signal to regulators and investors that they are managing risk, not reacting to it.
The Bottom Line
The next wave of examinations will separate firms that treat compliance as a check-the-box exercise from those that see it as a differentiator.
At Salus GRC, we help private fund advisers turn scrutiny into strength — ensuring your governance, documentation, and controls tell a story of readiness and credibility.