Good Faith Determinations of Fair Value

The Securities and Exchange Commission ("Commission') is adopting a new rule under the Investment Company Act of 1940 ("Investment Company Act' or the "Act') that will address valuation practices and the role of the board of directors with respect to the fair value of the investments of a registered investment company or business development company ("fund'). The rule will provide requirements for determining fair value in good faith for purposes of the Act. This determination will involve assessing and managing material risks associated with fair value determinations; selecting, applying, and testing fair value methodologies; and overseeing and evaluating any pricing services used. The rule will permit a fund's board of directors to designate certain parties to perform the fair value determinations, who will then carry out these functions for some or all of the fund's investments. This designation will be subject to board oversight and certain reporting and other requirements designed to facilitate the board's ability effectively to oversee this party's fair value determinations. The rule will include a specific provision related to the determination of the fair value of investments held by unit investment trusts, which do not have boards of directors. The rule will also define when market quotations are readily available under the Act. The Commission is also adopting a separate rule providing the recordkeeping requirements that will be associated with fair value determinations and is rescinding previously issued guidance on the role of the board of directors in determining fair value and the accounting and auditing of fund investments.