The Securities and Exchange Commission (SEC) is implementing a new rule, titled Rule 2a-5, under the Investment Company Act of 1940. This rule sets requirements for how investment companies should determine the fair value of their investments. Key elements include the management of valuation risks, specification of suitable fair value methodologies, and supervision of pricing services used to assess investment value. Additionally, the rule allows investment companies to designate a valuation expert to handle these assessments, provided they remain under the company's board's oversight. Furthermore, a new accompanying Rule 31a-4 mandates recordkeeping requirements to support these fair value determinations.
Simple Explanation
The Securities and Exchange Commission has made a new rule to help investment companies decide how much their investments are really worth. This rule asks them to be careful and honest when figuring out the value and to keep detailed records, so everyone can understand how they got their numbers.