Last Thursday, the ICI published a "Compendium of SEC Valuation Guidance, "an indexed and easily searchable compendium of the registered investment company valuation guidance issued by the SEC." The compendium, "SEC Valuation and Liquidity Guidance for Registered Investment Companies," is composed of two volumes. The first volume pertains to registered investment companies generally and the second volume deals with money market funds in particular." In addition to containing extensive accounting and valuation guidance, "SEC Valuation and Liquidity Guidance for Registered Investment Companies, Volume 2," a 329-page monster, contains the entire text of Rule 2a-7 of the Investment Company Act and its subsequent amendments, releases, staff guidance, and SEC enforcement actions on valuation.
The Volume 2 introduction states, "This publication is intended to provide a compendium of U.S. Securities and Exchange Commission (SEC) releases, staff letters, and enforcement actions related to the mutual fund valuation process. ICI published this document for use by legal and compliance professionals, service providers, and others involved in fund valuation practices. This publication is being distributed with the understanding that ICI does not render any legal, accounting, or other professional advice. Although ICI has made reasonable efforts to compile the SEC's guidance regarding fund valuation for the convenience and information of its members and others, ICI does not guarantee and is not responsible for the accuracy or completeness of this publication."
The sections of "SEC Valuation and Liquidity Guidance for Registered Investment Companies, Volume 2" includes: Rule 2a-7 (1983) (p. 1), Accounting Series Release No. 219 (1977) (p. 13), Proposal Regarding Valuation of Debt Instruments and Computation of Current Price Per Share by Certain Open-End Investment Companies (Money Market Funds) (1982) (p. 18), Adoption of Requirements Regarding Valuation of Debt Instruments and Computation of Current Price Per Share by Certain Open-End Investment Companies (Money Market Funds) (1893) (p. 33), Adoption of Requirements Regarding Acquisition and Valuation of Certain Portfolio Instruments by Registered Investment Companies (1986) (p. 51), Proposed Revisions to Rules Regulating Money Market Funds (1990) (p. 62), Adoption of Revisions to Rules Regulating Money Market Funds (1991) (p. 87), Proposed Revisions to Rules Regulating Money Market Funds (1993) (p. 117), Adoption of Revisions to Rules Regulating Money Market Funds (1996), (p. 169), Proposed Technical Revisions to the Rules and Forms Regulating Money Market Funds (1996) (p. 219), Adoption of Technical Revisions to the Rules and Forms Regulating Money Market Funds (1997) (p. 247), Proposal Regarding Treatment of Repurchase Agreements and Refunded Securities as an Acquisition of the Underlying Securities (1999) (p .283), Adoption of Requirements Regarding Treatment of Repurchase Agreements and Refunded Securities as an Acquisition of the Underlying Securities (2001) (p. 297), Excerpt from Proposal Regarding References to Ratings of Nationally Recognized Statistical Rating Organizations (2008) (p .309), Staff Guidance to ICI on Amortized Cost "Shadow Pricing" (2008) (p. 311), and SEC Enforcement Actions on Valuation.
Among the interesting historical tidbits, "Since 1980, the rule has standardized performance advertising by money market funds. Under the rule, money market funds, as defined in the rule, have been limited to quoting seven day yield quotations calculated in accordance with a prescribed formula. The Commission took this action because the lack of comparability of money market fund yield quotations could confuse and mislead investors, and because of the significant role which yield quotations were playing in promoting money market funds."
We applaud and thank the ICI for compiling these documents, many of which were previously only available in hardcopy. They should serve as an essential reference for money fund management, compliance, and accounting personnel.
