PRICING AND VALUATION OF REGISTERED INVESTMENT COMPANY PORTFOLIO SECURITIES

The daily valuation of portfolio securities can be one of the most onerous aspects of managing a registered investment company or mutual fund. The developing complexity of securities combined with the increasing influence of foreign markets and nonexchange‐traded holdings have made the accurate pricing of securities difficult at best. Mutual funds typically rely on a myriad of sources to price their portfolio holdings, including domestic pricing services, broker‐dealers, foreign custodians or pricing agents, matrix pricing, fair value committees, or any combination thereof (see Exhibit). While the pricing function is typically delegated, fund management and the board of directors or trustees have the ultimate responsibility to ensure that appropriate pricing procedures and supervisory activities are in place.