Regulators Hone In on Pricing

Terry Flanagan

Regulators have been zeroing in on companies’ internal controls over the use of prices and related information obtained from third-party pricing sources, prompting companies to beef up their internal controls.

“In the current regulatory environment, financial service companies need transparency and oversight tools more than ever,” said Ron Valinoti, founder of Triangle Park Capital Markets Data.

SIX Financial Information, a provider of global financial information, is partnering with Triangle Park, a provider of market pricing, credit and reference information, to assist firms in addressing regulatory and auditing price verification as well as surveillance requirements.

Triangle Park clients now have the ability to incorporate security prices supplied by SIX Financial Information to their workflow tools to perform tolerance and variance checks for compliance and audit purposes.

“By providing our clients with the option to verify market prices and validate their portfolio values with an independent, objective source like SIX Financial Information, we’re giving them a best-of-breed alternative,” said Valinoti.

The partnership enhances Triangle Park’s data offering for surveillance, monitoring and OTC price verification activities.

The company provides difficult to procure workflow tools and market data sets for monitoring fair/reasonable trading execution, liquidity of OTC assets and day-to-day market volatility.

With the ability to draw prices from SIX Financial Information’s extensive database of over 11 million global securities, Triangle Park’s customers now have access to one of the most comprehensive data sets in the world.

“Working with a partner like Triangle Park is an ideal situation for SIX Financial Information,” said Barry Raskin, managing director of SIX Financial Information USA. “Our database covers more than 11 million securities. And their unique offering adds tremendous value to our data through services that help clients realize cost efficiencies and improve operational workflow.”

The Investment Company Act of 1940 generally requires registered investment companies to use market values to value portfolio securities for which market quotations are readily available.

When market quotations are not readily available, funds must value portfolio securities and all other assets by using their fair value as determined in good faith by the board of directors of the funds.

One area in particular that may warrant increased focus relates to ensuring that adequate controls are in place and operating effectively to identify when securities begin to become thinly traded so that necessary changes to the valuation approach, and the related measurement and disclosures, can be made on a timely basis, according to the SEC’s Office of the Chief Accountant.

Measurements and disclosures may be subject to significant judgments by management, particularly in instances where there are no similar securities that are actively traded and, accordingly, where observable market participant assumptions may be used to estimate fair value.

These estimates and related disclosures can be important information to investors not only for financial institutions but also for other issuers as well, including foreign private issuers who file financial statements in accordance with IFRS.

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