SEC Releases FAQs on New Rules Establishing Updated Regulatory Framework for Fund Valuation Practices

The staff of the SEC’s Division of Investment Management (Staff) has released responses to frequently asked questions (FAQs) related to the adoption of rules 2a-5 and 31a-4 under the 1940 Act (Rules).   Rule 2a-5 establishes requirements for satisfying a fund board’s obligation to determine fair value in good faith for purposes of the 1940 Act, and new rule 31a-4 provides the recordkeeping requirements associated with fair value determinations.

The FAQs, released on March 1, 2020, currently include one FAQ.  That FAQ explains that, after March 8, 2021 (the effective date of the Rules), an independent public accountant can stop looking to the auditing guidance contained in ASR 118 (regarding appropriate methods for auditing the valuation of fund securities) and instead solely rely on relevant auditing standards of the Public Company Accounting Oversight Board prior to the withdrawal of ASR 118 on the compliance date for the Rules, September 8, 2022.

The Staff expects to update the FAQs from time to time to include responses to additional questions.

The FAQs are available at https://www.sec.gov/investment/valuation-faq.