Roadmap for determining valuations under challenging circumstances (Hedge Fund Law Report)

Valuation policies should help guide a process to meet SEC requirements, but in certain situations that could become challenging. For hedge funds and other private funds, certain steps can help avoid potential violations when firm guidelines do not include a failsafe in instances that require a deviation from the usual valuation procedures. Amy Lynch, FrontLine’s Founder and President, offers these recommendations: convene a valuation committee to address situations that are outside the norm; when a circumstance requires it, determine how to proceed to get the fund’s assets properly valued; and have written records from committee meetings that support the rationale behind the alternative valuation procedure. Ms. Lynch further adds that a temporary change, such as caused by an event creating severe market volatility, needs to be documented, but would not necessitate a permanent valuation policy change. See Hedge Fund Law Report (subscription required), “Valuations: Five Steps to Take When Deviating From Usual Procedure (Part Two of Two)”