IOSCO Publishes Principles for Valuation of Fund Assets (with Lofchie Comment)

The Board of the International Organization of Securities Commissions published the final report on Principles for the Valuation of Collective Investment Schemes, containing a list of principles intended to serve as a basis for both industry practitioners and regulators to assess the quality of regulation and industry practices regarding the valuation of collective investment schemes (CIS).

Lofchie Comment: Although this document does not have the force of law, for anyone involved in valuation, whether at a public or a private fund, it is worth reviewing. Valuation is, and will be, one of the major topics of regulatory interest. Funds should be making every effort to review their procedures to be sure that they are sufficient, to document those procedures, and to be sure that they comply with what they have documented. This does not mean that funds should necessarily be following the IOSCO principles or institute whatever the regulators may assert is "best practices." Some of what can be seen from the regulators as to required valuation procedures strikes me as somewhat impractical. But that does not diminish the fact that valuation is a hugely important compliance issue and that having good procedures matters both to regulators and to investors. Accordingly, unless funds document and follow high standards in this area, they are likely to be held to the regulators' impossible standards.

See: Final Report: Principles for the Valuation of Collective Investment Schemes.See also: Press Release.