Valuation governance frameworkValuation governance framework

Valuation governance framework

39. An RSE licensee must have an adequate valuation governance framework, which consists of the structures, processes, procedures and controls necessary to identify and manage valuation risk of investments.
40. The valuation governance framework must include a Board-approved valuation policy which, at a minimum, outlines:

(a) the roles and responsibilities of persons for the oversight and management of valuation processes and procedures, including the Board, relevant Board committees and senior management;

(b) the key metrics and information that must be reported to the Board, relevant Board committees and senior management, and the frequency of that reporting;

(c) the valuation methodology employed for each asset class (and sub-asset class and instrument/holding vehicle type where relevant), including the sources of valuation inputs;

(d) the circumstances under which independent external valuations are to be obtained;

(e) the frequency of valuation of investments having regard to the prevailing market, economic environment, member equity considerations and matters concerning the ongoing appropriateness of the asset valuation;

(f) the circumstances in which interim valuations are to be made, to ensure the approach taken is consistent and transparent;

(g) the triggers that would require an interim valuation of investments outside of the frequency determined under paragraph 40(e) and which reflect the circumstances identified in paragraph 40(f);

(h) a review process to ensure that the valuation policy remains effective;

(i) the validation of valuation outputs including any back-testing procedures; and

(j) the circumstances as to when to accept, reject or reassess valuations of investments to ensure that an RSE licensee’s valuations remain appropriate, including an escalation procedure for the resolution of any disputed valuations.

41. An RSE licensee must ensure that the key metrics and information referred to in paragraph 40(b) are periodically reviewed by the Board, relevant Board committees and senior management, to ensure that such information and the key metrics remain appropriate to enable sufficient oversight of valuation risk.