In Ignites, Paulita Pike Provides Insight into the SEC’s Impending Valuation Rule

Fund companies have been building out new systems and processes to prepare themselves for the Securities and Exchange Commission’s valuation rule, which goes into effect this week, say lawyers and compliance professionals. Some shops are simply tweaking their existing valuation plumbing to meet the commission’s new standards, while others, especially small shops, are overhauling their operations.

Paulita Pike, partner in Ropes & Gray’s asset management practice, told Ignites that “the valuation rule might be a bigger lift than other rules finalized in late 2020 and early 2021 because of its extensive board reporting requirements.”

“Many firms have picked the investment advisor as the valuation designee,” Pike said. “Fund shops have also struggled in determining which processes the designee should undertake and which ones the board should follow under the rule requirements.”

Under the new rule, the board will be required to select a “valuation designee,” who would be responsible for making fair valuation determinations and reporting that information to the board. The designee must also select, apply and test valuation methodologies, the rule states.