Developments in the Fixed-Income Market: Review of Valuation and Liquidity Procedures

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August 10, 2007

TO: BOARD OF GOVERNORS No. 20-07
CHIEF COMPLIANCE OFFICER COMMITTEE No. 18-07
CLOSED-END INVESTMENT COMPANY COMMITTEE No. 29-07
COMPLIANCE ADVISORY COMMITTEE No. 17-07
EQUITY MARKETS ADVISORY COMMITTEE No. 47-07
FIXED-INCOME ADVISORY COMMITTEE No. 21-07
INST. MONEY MARKET FUNDS ADVISORY COMMITTEE No. 24-07
INTERNATIONAL COMMITTEE No. 23-07
INVESTMENT COMPANY DIRECTORS No. 19-07
MONEY MARKET FUNDS ADVISORY COMMITTEE No. 22-07
MUNICIPAL SECURITIES ADVISORY COMMITTEE PRIMARY CONTACTS - MEMBER COMPLEX No. 17-07
SEC RULES COMMITTEE No. 64-07
ACCOUNTING/TREASURERS COMMITTEE No. 17-07 RE: DEVELOPMENTS IN THE FIXED-INCOME MARKET:  REVIEW OF VALUATION AND LIQUIDITY PROCEDURES

 

We have been monitoring and discussing with members developments affecting the fixed-income market and specifically certain asset-backed securities and collateralized debt obligations.  In light of these developments, we believe it is imperative that funds take steps to assure that they are using appropriate and consistent methods to calculate the value of these assets and have adequate policies and procedures in place for making associated liquidity determinations. 

Institute members may wish to review their policies and procedures relating to the valuation and liquidity of fund assets and, in particular, asset-backed securities and collateralized debt obligations, in light of current market circumstances.

Paul Schott Stevens
President