What changes
An RIA's duties of care and loyalty under the Investment Advisers Act of 1940 do not have a private credit counterpart. The terrain has changed. In public fixed income, continuous pricing, standardized disclosure, and daily liquidity do much of the fiduciary's evidentiary work automatically. In private credit, each of those supports is weaker, and the advisor's own process has to replace them.
The pattern running through that table is consistent. Private credit removes the ambient protections of public markets and shifts the burden to advisor process. Each section below addresses one piece of what gets transferred.
Valuation: Rule 2a-5 and the fair value framework
In public credit, the market sets the price. In private credit, the fund sets it within a regulatory framework.
SEC Rule 2a-5 governs how a registered fund determines fair value in good faith. The board may designate a valuation designee, typically the adviser, while retaining oversight. The designee must assess and manage material valuation risks, establish and test methodologies, oversee any pricing services, and maintain records.14
Three questions follow for an advisor evaluating a fund.
- Who values the portfolio, and how independent are they? Independent third-party valuation input and the share of the portfolio it covers are the central governance facts.
- How often, and with what consistency in methodology? Methodology that shifts when results are unflattering is the pattern to watch for.
- How do the marks compare with other lenders' marks on the same loan? When several funds hold the same credit, divergent marks are informative.
A self-marked NAV with limited independent oversight is a red flag in any fund, and even more so in an evergreen vehicle, where investors transact at that NAV every quarter.
The Marketing Rule and why yield is the sensitive number
The SEC Marketing Rule, Rule 206(4)-1, has been fully enforceable since November 4, 2022, and governs how advisers present performance, including when they forward a sponsor's materials.15 Private credit raises a specific issue under this rule.
SEC staff guidance issued in March 2025 treats yield as a "performance-related characteristic" rather than as performance itself, while total return is performance.15 That distinction has practical consequences in an asset class marketed almost entirely on income.
The divergence is not hypothetical. When a fund distributes more than it earns, the excess is return of capital: the investor's own money returning, reducing cost basis rather than representing income. SEC staff have observed that "a high distribution rate largely comprised of return of capital might cause investors to erroneously conclude that the fund is generating a high total return."16 Rule 19a-1 requires funds to notify shareholders of the sources of distributions, and those notices are among the most useful documents an advisor can review.
The practical test: For any fund an advisor presents, can they state the distribution rate, the net investment income that covers it, and the total return for the same period? If not, the Marketing Rule analysis is incomplete.
Leverage disclosure
Fund-level borrowing is a risk the client holds without it appearing in their account. Four items belong in the file: the asset coverage ratio and its cushion relative to the regulatory minimum, the debt-to-equity level and policy, the mix of secured and unsecured borrowing and its maturity profile, and any off-balance-sheet exposure.
That last item is easy to miss. Fitch has noted that leverage held through joint ventures and finance companies "can alter the risk profile" of BDCs in ways that headline leverage figures do not capture.13 Federal Reserve research adds a concentration dimension: in bank lending to BDCs, "the top three banks account for almost half of the market," and "nearly 90 percent of bank lending to BDCs takes the form of credit lines."2
Conflicts of interest
Private credit multiplies the ways an adviser or its affiliates can earn compensation, and each requires either elimination or full and fair disclosure. Affiliated vehicles deserve particular care because the client must be able to see the relationship stated plainly.
The platform referenced in this guide provides the example:
Notice of Conflict: Mr. Mark Buffington, Mr. Bill Harris, and BIP Capital, LLC are minority equity owners in LAGO Asset Management, LLC and accordingly are entitled to profits interests in LAGO. BIP Capital is also the fund administrator and receives compensation from LAGO Asset Management. Accordingly, this relationship creates a conflict of interest for BIP Capital, BIP Wealth, BIP Alliance and its personnel due to the minority ownership in LAGO. BIP Capital may be more inclined to speak favorably of, and recommend to prospective investors, LAGO Evergreen Credit given its profits interest in LAGO Asset Management.
The standard, named, specific, and attached to every relevant communication, is the one advisors should hold every sponsor to and themselves.
Regulators are paying attention
The SEC Division of Examinations included alternative investments, specifically "private credit and private funds with investment lock-ups for extended periods," in its fiscal 2026 examination priorities, with marketing, valuation, and disclosure identified as focus areas.17 The Financial Stability Board, in its May 2026 report on private credit vulnerabilities, warned that "valuation opacity and reliance on private credit ratings can amplify strains in stress."18
Neither is a reason to avoid the asset class. Both are reasons to keep the documentation file in order before anyone asks for it.