Regulatory Focus On Bond Valuation Should Not Be Ignored

By Joshua Newville, Robert Plaze and Michael Mavrides (June 14, 2017, 12:00 PM EDT) -- According to recent news reports,[1] the U.S. Department of Justice and the U.S. Securities and Exchange Commission are investigating the possible improper use of third-party broker quotes by fund managers to value illiquid debt securities in their portfolios. Prosecutors are reportedly focused on possible instances where fund managers allegedly solicited predetermined or improper quotes from brokers, and used those estimates to inflate their own valuations of thinly traded mortgage bonds....

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