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  • Valuation

    • RM-4.1.8

      Wherever possible, a licensee must mark to market the value of its financial instruments, based on readily available close out prices from independent sources.

      Amended: July 2012
      Adopted: July 2007

    • RM-4.1.9

      Where marking to market is not possible, a firm must use mark to model in order to measure the value of its financial instruments. Marking to model is any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input.

      Amended: July 2012
      Adopted: July 2007

    • RM-4.1.10

      A licensee must ensure that its Board of Directors and senior management are aware of the positions which are subject to mark to model and understand the materiality of the uncertainty this creates in the reporting of the performance of the business of the firm and the risks to which it is subject.

      Adopted: July 2007

    • RM-4.1.11

      In addition to marking to market or marking to model, a licensee must perform independent price verification, such that market prices or model inputs are regularly verified for accuracy and independence.

      Adopted: July 2007

    • RM-4.1.12

      Systems and controls regarding valuations should include the following:

      (a) The department responsible for the validation of the value of assets and liabilities should be independent of the business trading area, and should be adequately resourced by suitably qualified staff;
      (b) All valuations should be checked and validated at appropriate intervals;
      (c) A licensee should establish a review procedure to check :
      (i) The quality and appropriateness of the price sources used;
      (ii) The level of any valuation reserves held; and
      (iii) The valuation methodology employed for each product and consistent adherence to that methodology;
      (d) A licensee should document its policies and procedures relating to the entire valuation process. In particular, the following should be documented:
      (i) The valuation methodologies employed for all product categories;
      (ii) Details of the price sources used for each product;
      (iii) The procedures to be followed where a valuation is disputed internally or with a service provider;
      (iv) The level at which a difference between a valuation assigned to an asset or liability and the valuation used for validation purposes will be reported on an exceptions basis and investigated;
      (v) Where a licensee is using its own internal estimate to produce a valuation, it should document in detail the process followed in order to produce the valuation; and
      (vi) The review procedures established by a licensee in relation to the requirements of this section should be adequately documented and include the rationale for the policy.
      Adopted: July 2007