The Securities and Exchange Commission is trying to figure out if mutual funds' subprime holdings are accurately valued. Bloomberg's Miles Weiss and Jesse Westbrook report that in August the SEC talked to the 25 biggest fund firms, fearing that the combined effect of redemptions and subprime fallout could be misleading and hurting the shareholders who stay behind.

"If they sell off the more-liquid securities to satisfy redemption requests, then the valuation of the remaining portfolio becomes even more critical," Douglas Scheidt, associate director in the SEC's investment management division, told Weiss and Westbrook.

An American Funds spokesperson insists that valuing its funds subprime holdings "was not a problem", but at least one fund firm has publicly acknowledged the issue. In a 12b-25 filed August 30 with the SEC, Morgan Keegan revealed that it "is unable to complete" certain forms for the recent fiscal year for three funds (the Regions Morgan Keegan Select High Income Fund, the Regions Morgan Keegan Select Intermediate Bond Fund and the Regions Morgan Keegan Select Short Term Bond Fund because "recent instability in the markets for fixed income securities has necessitated a more extensive process for verification of the values of certain of the portfolio securities held by the funds at the June 30 fiscal-year-end in order to assure that this information will be accurately reflected in the Funds' audited financial statements." 

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