AMG Timeline for Valuation Guidelines
At yesterday's AMG Lunch & Learn on Valuations, over 120 industry members participated as panelists discussed several pricing-related issues which will be addressed in AMG's forthcoming White Paper. Cynthia Meyn of Morgan Stanley Investment Management, who chairs the Valuations initiative, provided opening remarks describing how the AMG has formulated an approach to providing guidance for the industry in this area. Discussion revolved around:
- the market value component of valuation
- the added complexities of valuing less liquid securities, structured products, derivatives and other like asset types
- the importance of knowing the technical aspects of the market and market trends
- the importance of using technology
- determining appropriate tolerances and examining where there are breaks
- understanding the models used by pricing sources
- having a valuation policy that ties in with the operations side of the business
- using prices from multiple sources
- having a predetermined fair value methodology
The following timeline for Valuation Guidelines Initiative was mentioned.
September 7, 2007: AMG webinar that described buy side valuation practices, use of pricing models, types of vendor services and other related developments.
November 9, 2007: SIFMA's AMG Steering Committee decided to develop draft valuation guidelines White Paper.
December 2007 to March 2008: AMG staff and outside counsel Willkie Farr & Gallagher LLP conduct member visits with approximately 15 SIFMA buy side member firms to discuss the various approaches being utilized by asset management firms to adjust to new developments in the valuation space. These visits show diverse business models and, thus, variable but equally effective ways to satisfy valuation responsibilities. The knowledge gained in the member visit phase of this initiative is expected to be helpful to the AMG in connection with the proposed White Paper.
March 2008: SIFMA representatives update SEC officials that AMG is developing a draft Valuation Guidelines White Paper and that the process and format of this initiative is similar to AMG's recent White Paper concerning Fixed-Income Securities Best Execution Guidelines.
April 2008: AMG continues to socialize the legal context and other matters of interest concerning valuation practices through 4/17/08 Lunch & Learn in NYC and AMG Steering Committee meeting in Washington, D.C., on 4/30/08.
Spring 2008: AMG will coordinate its efforts concerning its proposed Valuation Guidelines White Paper with the SIFMA membership, other relevant trade groups and regulatory authorities. AMG will report accordingly on the status of these matters in its newsletters and the SIFMA web site.
If you have any questions regarding the Valuation timeline or the initiative generally, please contact Joseph Sack, Managing Director at SIFMA at 212.313.1165 or at jsack@sifma.org.
Credit Corner:
A New Special Section of the Weekly Report on News and Policy Developments relating to Today's Markets and What Every Asset Manager Should Know.
Housing Legislation Proposed in Congress
On April 17, 2008, the House Financial Services Committee introduced legislation that addresses the rising number of housing foreclosures and the impact those foreclosures on cities and states. The legislation will be divided into two measures:
1) H.R. 5830, the FHA Housing and Homeowner Retention Act, would expand the FHA program to help refinance at-risk borrowers into viable mortgages and also requires the Federal Reserve Board to conduct a study on the need for an auction or bulk refinancing mechanism.
Click here to read H.R. 5830, FHA Housing and Homeowner Retention Act
2) H.R. 5818, the Neighborhood Stabilization Act of 2008, would provide loans and grants to states and cities to deal with problems associated with large numbers of foreclosures in neighborhoods across the country. H.R. 5818 was introduced by Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters.
Click here to read a summary of the Neighborhood Stabilization Act of 2008
Click here to read H.R. 5818, the Neighborhood Stabilization Act of 2008
Important Publications:
SIFMA SmartBrief (past five issues)
SIFMA Regulatory Update
SIFMA Washington Weekly