Valuation of illiquid assets is one of the most perilous aspects of fund management and a perennial subject of SEC scrutiny. The SEC routinely penalizes managers that improperly overvalue their funds’ assets in order to boost their performance and the associated fees that they collect. In an unusual twist, the SEC recently took action against an investment adviser and one of its principals for deficient policies and procedures that allegedly resulted in the undervaluation of many of the bonds in a fund’s portfolio. This article analyzes the alleged compliance deficiencies and the terms of the settlement order. The settlement highlights the importance of having finely tuned valuation policies and procedures, as well as the risk of enforcement action for violating those procedures, even in the absence of an allegation of harm to investors. See our two-part primer on compliance issues for credit strategies: “Key Credit Concepts and Risks in Credit Investing” (Apr. 4, 2019); and “Additional Risks in Credit Investing” (Apr. 11, 2019).