The Securities and Exchange Commission (hereinafter referred to as “SEC”) has issued a public notice to investors on the use of fair value through other comprehensive income mark-to-market valuation methods by market operators in the valuation of investment assets/securities and portfolios in the securities sector.

According to the Securities and Exchange Commission, the mark-to-market valuation method allows fair values of accounts that are subject to periodic fluctuations to be measured, that’s, assets and liabilities.

“This Public Notice is to alert the investing and general public that the Securities and Exchange Commission (SEC) has directed all market operators to use the mark-to-market valuation method in the valuation of investment assets / securities and portfolios in the securities sector.”
SEC

SEC indicated that the directive with reference number SEC/DIR/002/11/2022 to provide consistency in the valuation of assets and portfolios in the securities industry, ensure that the portfolios reflect market values, as well as protect investors, especially investors of Collective Investment Schemes.

Meanwhile, the Commission urged the investment public to remain calm as it continues to deal with irregularities in the market. This latest notice is issued pursuant to section 3(i)(m) and 208© of the Securities Industry Act, 2016 (Act 929) as amended.

“The SEC wishes to assure all market operators, investors, and the public that it is committed to ensuring rigorous enforcement of all the rules for operators in the capital market, to promote the growth and development of an efficient, fair, and transparent securities market in which investors and the integrity of the market are protected.”
SEC

The goal of the mark-to-market method valuation is to provide time-to-time appraisals of the current financial situation of a company or institution. It is done while keeping in mind the prevailing market conditions.

The mark-to-market method can also be used in financial markets in order to show the current and fair market value of investments such as futures and mutual funds.

When compared to historical cost accounting, mark-to-market can present a more accurate representation of the value of the assets held by a company or institution. It is because, under the first method, the value of the assets must be maintained at the original purchase cost.

The Securities and Exchange Commission concluded the statement, noting that the commission is the statutory body mandated by the Securities Industry Act 2016 (Act 929) as amended by the Securities Industry (Amendment) Act 2021 (Act 1062), (hereinafter referred to as ‘the Act) to promote the orderly growth and development of an efficient, fair, and transparent securities market in which investors and the integrity of the market are protected. The SEC also has the mandate to maintain surveillance over activities in securities to ensure orderly, fair, and equitable dealings in securities and to protect the integrity of the market in accordance with Sections 2 and 3 of the Act.