Interval Fund Faces Valuation Issues | Fred Teufel Reacts
Vigilant Insights
Brief Introduction
Vigilant Director, Fred Teufel, CPA, MBA, CGMA, was quoted in an Ignites article recently discussing a request made to the SEC by a $44 million interval fund to extend its deadline for quarterly and annual shareholder reports.
SEC registrants typically have sixty days to file annual reports, with the Form N-CSR required at most 10 days later. This request is the second one made by the fund since the fiscal year ended in June.
Fred Teufel Insights
Fred discussed how changes in interest rates affect the value of real estate loans, and the variation in interest rates and default rates can happen faster than the fund’s ability to incorporate those changes into their valuation models.
He felt there were three likely causes for the reporting delay:
- Auditor pushback on valuation factors and/or valuation methodology.
- A delay in receiving the data needed to accurately value investments or complete the shareholder reports.
- Complications emerging throughout the process due to the pace and magnitude of changes in the economic environment that might materially impact the financial statement amounts or disclosures.
Vigilant’s Conclusion
Both proper valuation and meeting SEC deadlines are important aspects of achieving compliance success and avoiding costly regulatory headaches.
It is essential that firms are prepared to address the financial reporting risk that a changing economic environment and the overhang of uncertainty could adversely affect their ability to meet SEC deadlines, which is an easier task when your firm has a proactive approach to compliance.