On February 12, 2012 the Technical Committee of the International Organizations of Securities Commissions (“IOSCO”) issued a draft consultation report to expound on its May 1999 final report on principles for valuation of collective investment schemes (“CIS”). The objectives of the May 1999 report were to obtain a greater understanding of the jurisdictional differences and regulator approaches to the valuation of CIS (mutual funds) and pricing of CIS interests; and gain an understanding of the extent and type of enforcement of jurisdictional rules relating to the valuation and pricing of CIS. Also, they recommended some ethical, disclosure and share calculation principles.
The Technical Committee consists of the chairpersons of the SEC and CFTC. And other government directors of securities regulation which include: Spain, UK, Japan, Germany, France, Italy, Mexico, Switzerland, Quebec, Ontario, China, Brazil and Australia.
Comments were due on or before May 18, 2012 and were specifically requested on the following:
- Do these principles adequately address the regulatory issues raised by the valuation of CIS?
- Are potential conflicts of interest appropriately addressed? Do you see a need for more stringent principles in this area?
- In particular, does the principle on the NAV at which the purchase and redemption of CIS interests should be effected, adequately cover the issues.
In the February 2012 report the Committee proposed 13 principles on pricing mutual funds or CIS. Principles 1 to 5 are recommendations for written pricing policies and procedures for the securities or assets held by a CIS. They should identify the methodologies that will be used to value each asset held by the CIS. Structured financial instruments should be based on qualitative and quantitative analyses which have to be conducted both in normal and stress scenarios.