SEC updates regulatory framework for good faith determinations of fair value

Abstract

Purpose

To explain the new U.S. Securities and Exchange Commission (“SEC”) Rule 2a-5 (the “Fair Value Rule”) under the Investment Company Act of 1940 (the “1940 Act”), which addresses the valuation practices of registered investment companies and business development companies.

Design/methodology/approach

Provides an overview of the Fair Value Rule, followed by a more detailed summary of the key provisions, including relevant guidance provided by the SEC in the release adopting the Fair Value Rule.

Findings

The Fair Value Rule establishes a specific framework, a standard of baseline practices across funds, and a set of required functions that must be performed in order to determine in good faith the fair value of a fund’s investments for purposes of applying Section 2(a)(41) of the 1940 Act.

Originality/value

Practical guidance from experienced investment management lawyers.

Citation

Palmer, C., Delligatti, P., Zutz, A. and Lane, W. (2021), "SEC updates regulatory framework for good faith determinations of fair value", Journal of Investment Compliance, Vol. 22 No. 2, pp. 201-213. https://doi.org/10.1108/JOIC-04-2021-0019