SEC Accuses Fund Directors of Breaching Their Valuation Duties

In a case involving fair valuation of structured notes, the SEC signaled that when investment company fund boards delegate the responsibility to fair value portfolio securities, they must provide “meaningful substantive guidance” and continuously review the appropriateness of valuation methodologies.

On December 10, 2012, the Commission announced charges against eight former members of the board of directors of several closed-end and open-end registered investment companies. The Commission alleges that the directors failed to properly fair value a majority of the funds’ portfolio holdings from January 2007 until August 2007. The funds’ investment adviser settled charges in 2011 based on the same set of facts.

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Topics:  Board of Directors, Enforcement, Fiduciary Duty, Investment Adviser, SEC, Valuation

Published In: Administrative Agency Updates, Business Organization Updates, Business Torts Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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