What is the boards responsibility with respect to shadow pricing?
One of the most important requirements overseen by a fund’s board of directors is the requirement that the fund periodically “shadow price” the amortized cost NAV of the fund’s portfolio against the marked-to-market NAV of the portfolio. When a downgrade, default, or other development causes a difference of more than one-half of 1 percent (or $0.005 per share), the fund’s board of directors must consider promptly what action, if any, should be taken, including whether it should suspend redemptions and liquidate the portfolio or discontinue the use of the amortized cost method of valuation and re-price the securities of the fund below (or above) $1.00 per share, an event known as “breaking the dollar” (or “breaking the buck”). Alternatively, an affiliate of the fund may take actions to prevent these occurrences. In some cases, the fund’s adviser or affiliate will purchase the troubled security. Regardless of the extent of the deviation, the board of a money market fund also has a duty t
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