The International Organisation of Securities Commissions (IOSCO) has emphasised the need for accurate and robust valuation practices in collective investment schemes (CIS) to enhance investor confidence and safeguard the integrity of financial systems.

IOSCO stated this in a report titled “Recommendations on Valuing CIS,” released on Thursday.

A collective investment scheme is a structure that pools funds from multiple investors for investment in assets such as equities, bonds and real estate, with investors sharing risks and returns proportionately.

According to IOSCO, firms should establish comprehensive and documented policies and procedures to govern the valuation of fund assets.

The organisation said responsible entities must ensure an appropriate level of independence in valuation processes and adopt suitable methodologies for valuing each asset class held by a fund.

It also stressed that all fund assets should be valued at fair value.

IOSCO urged entities overseeing CIS to conduct periodic reviews of valuation policies and procedures to ensure their continued relevance and effective implementation.

It further recommended that firms carry out initial and ongoing due diligence on third-party valuation service providers engaged to perform valuation services.

According to the report, the use of such service providers should be clearly documented in a fund’s valuation policies and procedures.

IOSCO said the recommendations were informed by lessons from periods of market stress, including recent episodes of heightened market volatility.

It noted that the recommendations provide regulators and market participants with a clear and internationally applicable framework for strengthening valuation practices.

The organisation said the framework was designed to promote fair and consistent asset valuation across CIS, strengthen governance and oversight, and enhance accountability in valuation processes.

It added that the recommendations would improve transparency and disclosure to investors and regulators while mitigating systemic risks arising from inaccurate or inconsistent valuations.

“This report and its recommendations provide a globally relevant framework for securities regulators, fund managers and other stakeholders responsible for ensuring robust valuation practices.

“It also promotes consistent approaches across jurisdictions,” IOSCO stated.

The organisation said the recommendations reinforced its commitment to investor protection, market integrity and financial stability by providing a modern and comprehensive framework for fund valuation.

IOSCO is the global body of securities regulators and serves as the international standard setter for financial markets regulation.

The organisation develops and promotes internationally recognised regulatory standards and collaborates with other international bodies on global financial regulatory reforms. 

(NAN)