Investment Classification and Valuation Norms

Investment Classification and Valuation Norms- Investment management applies to the treatment of financial assets and other properties—not only buying and selling them. Management involves devising a short- or long-term plan for collecting and disposing of portfolio holdings. In terms of corporate finance, investment management means ensuring that the company’s assets and resources are well-utilized and maintained. It can also involve budgeting, banking, and tax services and duties, as well. Investment management, portfolio management, and asset management are all phrases that apply to services that give omission of a client’s investments. Investment management isn’t just about maintaining the special assets in a client’s case, it involves securing the portfolio extends to align with the client’s aims, risk tolerance, and financial priorities.

The Securities and Exchange Board of India (SEBI) has outlined investment valuation norms for the mutual funds to compute and carry out a valuation of its investment in its portfolio under Regulation 47 and Eight Schedule of SEBI (Mutual Funds) Regulations, 1996 as amended from time to time.
SEBI vide its notification dated February 21, 2012, has amended Regulation 47 and Eight Schedule and has mandated the mutual funds to value its investments on Principal of Fair Valuation to ensure fair treatment to all investors including existing investors as well as investors seeking to purchase or redeem units of mutual funds in all schemes at all points of time

The Investment Advisers Act of 1940 requires fund managers to create written policies and procedures “reasonably designed to prevent violation of the Advisers Act by the adviser or any of its supervised persons.” Policies and procedures around the valuation of portfolio assets, particularly illiquid assets that are difficult to value, have come under increased SEC scrutiny with a recent rise in enforcement actions.