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© 2013 Dechert LLP Mutual Fund Directors Forum 2013 Policy Conference Valuation Issues for Directors April 10, 2013 Robert Helm.

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Presentation on theme: "© 2013 Dechert LLP Mutual Fund Directors Forum 2013 Policy Conference Valuation Issues for Directors April 10, 2013 Robert Helm."— Presentation transcript:

1 © 2013 Dechert LLP Mutual Fund Directors Forum 2013 Policy Conference Valuation Issues for Directors April 10, 2013 Robert Helm

2 The word “value” appears 93 times in the Investment Company Act of 1940. The word “valuation” appears an additional 4 times. Getting valuation wrong has extensive and serious consequences The Importance of Valuation 2

3 with respect to securities for which market quotations are readily available, the market value of such securities with respect to other securities and assets, fair value as determined in good faith by the board of directors Section 2(a)(41) of the 1940 Act defines “value” to mean … 3

4 SEC Letter to ICI, April 30, 2001 A board acts in good faith when it “continuously reviews the appropriateness of the method used in determining the fair value of the fund’s portfolio securities…” A board is not acting in good faith if it “knows or has reason to believe that its good faith determination does not reflect the amount that the fund might reasonably expect to receive for the security upon its sale…” 4

5 In adopting Rule 38a-1, the SEC suggested that fund valuation policies should: Require the fund to monitor for circumstances that may necessitate the use of fair value prices; Establish criteria for determining when market quotations are no longer reliable for a particular security; Provide a methodology by which the fund determines the current fair value of the portfolio security; Provide for regular review of the appropriateness and accuracy of the method used in valuing securities and the ability to make any necessary adjustments; and Require fair valuation of portfolio securities whenever market quotations become unreliable. 5


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