As the SEC’s focus on private funds continues, PE sponsors should be prepared for more detailed scrutiny of their practices. The SEC may be moving away from its past stance of “do what you say and say what you do,” however, and toward a more prescriptive approach to what fund managers’ policies and procedures should entail. In a recent enforcement action, the SEC evaluated the substantive details of an investment adviser’s valuation policies and procedures, as well as how those policies were implemented and their effect on management fees. In addition to highlighting the SEC’s scrutiny of Level‑3 valuations, the enforcement action also illustrates the importance of working with auditors to resolve any issues that may be identified during audits in a timely manner. This article summarizes the operative facts and legal issues in the settlement order (Order), including long-standing deficiencies in the respondent’s policies and procedures. The article also contains insights from several industry experts about key takeaways from the Order, including how much it should concern PE sponsors overall, ways they should bolster their existing practices and what the Order says about the SEC’s stance on the private funds industry. For coverage of other recent cases relevant to PE sponsors, see “Three SEC Enforcement Actions Illustrate the Increasingly Quantitative Analysis Used to Enforce Rules and Verify Disclosures” (Nov. 17, 2022).