SEC Modernizes Framework for Fund Valuation Practices

December 14, 2020

Financial markets and fund investment practices have changed substantially since the US Securities and Exchange Commission (SEC) last addressed fund valuation comprehensively 50 years ago. In adopting Rule 2a-5 on December 3, the SEC has attempted to modernize the regulatory framework of fund valuation while rescinding much of the current existing fair valuation guidance. Under Rule 2a-5, determining fair value in good faith will require assessing and managing material risks associated with fair value determinations; selecting, applying, and testing fair value methodologies; and overseeing and evaluating any pricing services used.