NAV error correction is the procedure an investment fund follows when a published net asset value per share is discovered to have been wrong. Errors arise from mispriced securities, missed corporate actions or incorrect accruals. Investors who subscribed at an overstated price or redeemed at an understated one have lost money, and the fund itself loses when it issues units too cheaply or redeems them too dearly.
The administrator recalculates the price for each affected day and measures the error against a materiality threshold, expressed as a percentage of the price and set by the regulator or the fund's policy; money market funds have tighter thresholds than equity funds. Material errors are reported to the fund's board, depositary and, in many jurisdictions, the regulator, and the party at fault compensates the fund and investors. Prevention relies on controls within net asset value calculation, fund accounting and depositary oversight.