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IM Director Says Division is Updating Valuation Guidance for Boards

Dalia Blass, Director of the SEC’s Division of Investment Management, recently discussed her initiative to reach out to fund boards. She noted that meetings with independent directors, their counsel and auditors have yielded a number of similar themes, including the importance of respecting the line between fund oversight and management. Blass said the Division has prioritized certain areas for consideration and is in the early stages of working on options for updating valuation guidance “to reflect evolution in the markets and the standards for accounting, auditing and reporting.” Blass said she is hopeful the division can develop recommendations to assist boards in performing their valuation duties in a way that recognizes these changes. Industry participants have called on the Commission to reevaluate the board’s role in the valuing of portfolio securities, which has leaned toward requiring directors to understand complex valuation techniques at a high degree of granularity rather than permitting boards to fulfill their statutory responsibility by reasonably relying on management and other experts involved in the valuation process. Blass also noted that boards’ responsibilities related to affiliated transactions is on the list of priorities and that while the Division has compiled a list of current responsibilities that potentially blur the line between fund oversight and management, “we want to endeavor not to add to such responsibilities in future policy decisions.”