the firm ultimately responsible for the investment product. Wherever possible, prices should be sourced from independent parties like pricing vendors or stock exchanges. For some products such as OTC derivatives, broker quotes might get sourced from the trades' counterparties in addition to unrelated counterparties. Where fully independent price sources aren't available, separate price verification will be required to help mitigate any risks of mispricing. Separate Valuation Oversight and Price Verification It is a best practice to establish an independent (i.e., independent of portfolio management) and separate valuation oversight function that monitors the various aspects of the valuation policies and procedures and ensures continuous focus. This team should coordinate the valuation processes across different functions, perform an oversight of the pricing processes, and regularly assess the quality of the pricing used (price verification). If, as an exception,7 portfolio valuations need to be generated or obtained by the investment advisor, the independent valuation oversight team should play an active role in ensuring that such valuations are reasonable and appropriate. When all is said and done, this team should be deemed as ultimately and solely responsible for the fairness of pricing used. In an enforcement procedure involving a bank serving as a fund accountant for a money market fund, the SEC alleged that the bank lacked adequate controls because an employee improperly treated a significant drop in securities prices as a transmission error and manually overrode it. The SEC order indicated that, among other things, there was no oversight or review of pricing deviations by senior management, and no control or "flags" were put in place to alert senior management.8 Management Reporting and Valuation Committee The establishment of a valuation committee with senior management representation emphasizes the importance of the valuation control function. In addition to being a senior supervisory body, the valuation committee acts as a discussion forum and decision maker on any related topics. Representation should cover control functions such as risk management, legal, compliance, and controllers, as well as senior management. It should ensure that policies and procedures exist for reliable and accurate pricing, that an independent valuation oversight group exists to execute these procedures and policies, and that such group is independent of portfolio management and is adequately trained and funded. Finally, this committee should ensure that it is informed in a timely manner of all material judgments involving valuation practices. Reporting to this committee should be the valuation oversight group comprised of professionals charged with the responsibility of executing the policies and stan- 7For example, for the case where no external quote could be obtained or the obtained price was deemed no longer accurate. 8In the Matter of the Bank of California, N.A., Investment Company Act Rel. No. 19,545, 54 SEC Docket 989 (June 28, 1993).