A handful of mutual funds that invest in the securities of Taiwanese companies were slow to respond after an earthquake forced the closing of the Taiwan stock market for a week, said Paul Roye, director of the SEC's division of investment management.

A minority of about 20 funds that held Taiwanese securities were slow to switch to fair value pricing of their securities after the earthquake last month, he said.

Funds usually value the securities in their portfolios based on their closing market price. In instances where market prices are not available or are unreliable, federal securities laws require funds to assign a fair price to the securities based on their intrinsic value.

Immediately after the quake, SEC officials identified a total of about 20 funds that invested in Taiwanese securities, Roye said. SEC officials then called the funds' advisers and asked them how they were pricing the funds' holdings. Fund executives had overwhelmingly switched to fair value pricing, Roye said. A small number of funds, however, did not move to fair value pricing until the SEC made its inquiries, Roye said.

"That was a little bit disturbing to us," Roye said.

Roye spoke recently at a mutual fund industry conference hosted by the American Law Institute-American Bar Association of Washington, D.C. Roye declined to name the funds that committed the pricing error in an interview following his remarks.

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