The U.S. Securities and Exchange Commission’s enforcement arm is digging into continuation vehicles, a fund structure private equity and other asset managers use to move hard-to-sell holdings into a new pool.

Enforcement staff have been focusing on multiple continuation vehicles over the past several months while the agency looks for possible weak spots in private-market practices, Reuters reported. The SEC is examining whether disclosures line up across parties, how valuations are set, and whether the structure creates conflicts.

Reuters said it could not determine which funds are under review or what assets sit inside them. The report also noted that this enforcement-level attention on continuation vehicles had not been previously disclosed.

Continuation vehicles have become a common tool as exit conditions have tightened.

Evercore data cited manager-led secondary deals at $106 billion last year, up from $70 billion in 2024, with credit’s share rising to 11% from 5% in 2024.

SEC staff have also been trying to coordinate more closely across divisions, including examinations and investment management, to share information tied to private credit.

Last month, David Woodcock, director of the Division of Enforcement at the U.S. Securities and Exchange Commission, flagged private funds as an area the agency is watching closely amid turmoil in the private credit space.

The $3.5 trillion private credit market is facing increasing scrutiny amid rising concerns about liquidity, valuations, and risks tied to AI. Major banks have reported more than $108 billion in exposure.

“Private investment markets and efforts to broaden access to retail investors can be quite positive, but we must, and will, remain vigilant. We are attuned to potential risks relating to liquidity, fees, valuations, and conflicts of interest—not only at the private fund adviser level but throughout the distribution chain. Firms must ensure their representatives understand the products they sell and the investment profiles, risk tolerance, and liquidity needs of their clients,” Woodcock said during the MFA Legal & Compliance conference.

SEC Chairman Paul Atkins also noted last month that the SEC was investigating alleged fraud in the private credit sector.

Speaking at the Milken Institute Global Conference, Atkins did not identify which specific firms are under investigation. He noted that the SEC, U.S. Department of the Treasury, and the Federal Reserve are all monitoring the private credit space.

"We are taking it seriously, we are monitoring the situation. There have been allegations of fraud, and obviously, I can’t talk about any specific cases, but we are investigating that as well," Atkins said.

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