Portfolio Compliance and Valuation
May 11, 2010
1:00 PM – 3:00 PM EDT
Recent market events offer valuable lessons regarding the need for effective policies and controls addressing the timely and accurate valuation of securities and other investments. Valuation and pricing should be an area of prime concern to minimize your legal, regulatory and operational risk. Among the issues addressed will be: oversight of the valuation process, use of valuation committees to focus on valuation and pricing issues, use of pricing services, “end of day checks” of security valuation by the portfolio manager, review of overrides by appropriate personnel, etc. This presentation will emphasize the “best practices” that the SEC staff has identified during examinations and highlight those areas where enforcement actions have been brought.
This session will also focus on the critical risk area of portfolio compliance. Managing a client’s portfolio within relevant limitations and objectives is one of the most important fiduciary responsibilities of an investment adviser. Investment advisers are responsible for knowing their clients' investment policies, guidelines and mandates, as well as any other applicable investment restrictions, and for managing their clients’ accounts strictly in accordance with such guidelines and restrictions. Compliance with client guidelines and, when applicable, statutory or regulatory investment restrictions, is typically a contractual requirement under the terms of a client’s investment advisory agreement. The SEC views consistency of portfolio management decisions with clients' mandates as a primary internal control process. One of the greatest risks a firm faces is that client portfolios are accidentally managed in ways that expose client assets to a higher risk of loss.
The speakers will outline appropriate portfolio compliance policies, manual and automated internal controls, and pre-trade and post-trade monitoring processes that the SEC typically expects to see in place.
Learning Objectives:
- Understand the reasons behind the SEC’s current focus on valuation
- Recognize conflicts of interest that may arise with the valuation process
- Review and prioritizing pricing sources
- Resolve differing valuations between managers, sub-advisers and custodians
- Customize valuation procedures and supervising the valuation process
- Develop forensic tests of valuation procedures
- Ensure portfolio manager and compliance knowledge of client guidelines and all applicable investment restrictions
- Explore approaches to portfolio compliance monitoring
- Understand how to investigate, correct and report breaches
- Discuss periodic compliance certifications and audits
For Whom: Compliance officers and staff, as well as persons involved with client reporting, composite performance reporting, determining assets under management for client billing, and/or trading and reconciliation of illiquid securities. Persons involved with monitoring client portfolios.
Pre-requisites for participation: A basic understanding of the principles and regulations arising from the Investment Advisers Act of 1940
