SDNY's Clayton Takes Closer Look at Private Credit

Summary

Jay Clayton, US Attorney for SDNY, discusses his office's focus on possible valuation discrepancies in the private credit marketplace. He cites past cases where valuations were central and says leadership at large financial institutions support fair markets. The conversation highlights ongoing regulatory attention on marking practices in private credit.

• Clayton’s office is investigating valuation discrepancies in private credit where different participants mark the same asset at different prices.
• He points to red flags when one or two firms mark assets much higher than the majority, especially if fees are tied to those marks.
• Clayton cites past cases like Tryon, Seven, and First Brands where valuations were at the center of allegations.
• He dismisses the defense bar’s view that valuation cases are hard to bring, noting they have brought such cases already.
• Large, well-regulated financial institution leaders support efforts to ensure fair markets and discourage shenanigans.
• The discussion underscores regulatory risk for private credit firms with aggressive or inconsistent valuation practices.