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