Bloomberg Charged with $5 Million Fine
The Securities and Exchange Commission (SEC) made the announcement today that it has settled charges brought against Bloomberg Finance L.P. (Bloomberg) for making misleading disclosures in relation to its paid subscription service known as BVAL. This service offers financial services entities daily price valuations for fixed-income securities.
According to the findings of the order issued by the SEC, Bloomberg failed to disclose to its BVAL customers, beginning at least in 2016 and continuing through October 2022, that the valuations for certain fixed-income securities could be based on a single data input, such as a broker quote, that did not adhere to methodologies that it had previously disclosed.
The order concludes that the company was aware that its customers, including mutual funds, may utilize BVAL prices to determine fund asset valuations, including for valuing fund investments in government, supranational, agency, and corporate bonds, municipal bonds, and securitized products, and that BVAL prices, as a result, can have an impact on the price at which securities are offered or traded. The order also finds that the company was aware that BVAL prices may have an impact on the price at which securities are offered or traded.
Osman Nawaz, Chief of the Division of Enforcement’s Complex Financial Instruments Unit, stated that “Bloomberg has assumed a critical role as a pricing service to participants in the fixed-income markets,” and that “it is incumbent on Bloomberg, as well as on other pricing services, to provide accurate information to their customers about their valuation processes.”
Bloomberg is one of several pricing services that are required to fulfill this obligation. Because of this matter, it is clear that we will hold service providers like Bloomberg accountable for any misrepresentations that have an effect on investors.
According to the order issued by the SEC, Bloomberg committed a violation of subsection 17a(2) of the Securities Act. Bloomberg did not admit or deny the findings, but they did agree to pay a $5 million penalty, cease and desist from any future violations, and stop violating the terms of the agreement. The order issued by the SEC makes note of the fact that Bloomberg voluntarily undertook corrective actions in order to make enhancements to its BVAL line of business.
Under the direction of Natalie Brunson, Ana Petrovic, and Osman Nawaz of the Complex Financial Instruments Unit, and with assistance from trial counsel Robert Gordon and Howard Kaplan of the Enforcement Division’s office of Investigative and Market Analytics, Gregory Smolar of the Complex Financial Instruments Unit and Emily Rothblatt of the Chicago Regional Office were in charge of conducting the investigation on behalf of the SEC.
They were assisted by trial counsel Robert Gordon and Howard Kaplan of the office of Investigative and Market Analytics.
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