The SEC has recently followed through on warnings that it would specifically target improper valuation practices employed by private equity fund managers. See “SEC Asset Management Unit Chief Bruce Karpati Addresses Private Equity Enforcement Trends, Initiatives and Priorities,” Hedge Fund Law Report, Vol. 6, No. 6 (Feb. 7, 2013). The SEC recently entered into a settlement with two affiliated managers of a fund of private equity funds after charging both managers with misleading prospective and existing investors concerning the valuation of a private equity fund of funds that they managed and concerning the practices used to value the fund’s assets. In light of this enforcement action and the SEC’s stepped-up efforts to target private fund managers for enforcement activity, managers should proactively review their compliance policies and practices as a whole, and specifically those relating to valuation of fund assets. See “SEC’s OCIE Director, Carlo di Florio, Discusses Examination Strategies and Expectations for Impending Examinations of Private Equity Advisers,” Hedge Fund Law Report, Vol. 5, No. 19 (May 10, 2012). This article summarizes the SEC’s factual and legal allegations as well as the terms of the settlement with the managers. This article also makes four important recommendations to assist private equity managers in avoiding the improper valuation practices that were the subject of this enforcement action.