Lessons Learned from the Morgan Keegan Case, Part I – Valuation

The U.S. Securities and Exchange Commission (SEC)'s recent settlement in the latest chapter of the enforcement proceeding involving Morgan Keegan provides important guideposts on two of the hottest regulatory topics in the asset management industry – valuation and corporate governance. This article addresses the impact of the Morgan Keegan settlement on valuation procedures; a subsequent article on corporate governance is to follow.

The SEC has been beating the drum on valuation for the last year, and it should come as no surprise. Valuation of assets held by funds or in client separate accounts is one of the most critical matters for an asset management firm. Valuation requires the participation of portfolio management, finance and accounting, compliance, and senior management and/or the board of directors. Valuation plays a role in numerous core functions – in PPM presentation of track record, in ongoing performance reporting, in calculation of fees, and in