Bloomberg Fined $5M by SEC for Misleading Disclosures About Valuation Methodologies for Fixed Income Securities

The US Securities and Exchange Commission (SEC) fined Bloomberg Finance L.P. (Bloomberg) for misleading disclosures relating to its paid subscription service, BVAL, which provides financial services entities with daily price valuation for fixed-income securities.

The SEC found that from at least 2016 through October 2022, Bloomberg failed to disclose to its BVAL subscriber customers that the valuation for certain fixed-income securities could be based on a single data input, such as a broker quote, which did not adhere to methodologies it had previously disclosed. 

Upon investigation, the SEC found Bloomberg knew that its subscriber customers, including mutual funds, might use BVAL estimated prices to determine fund asset valuations, including for valuing fund investments in government, supranational, agency, and corporate bonds, municipal bonds and securitized products. Accordingly, the BVAL price may have an impact on the offering or trading price of securities.

Osman Nawaz, Chief of the Division of Enforcement's Complex Financial Instruments Unit, said: "Bloomberg has assumed a critical role as a pricing service to participants in the fixed-income markets and it is incumbent on Bloomberg, as well as on other pricing services, to provide accurate information to their customers about their valuation processes. This matter underscores that we will hold service providers, such as Bloomberg, accountable for misrepresentations that impact investors."

The SEC considered that Bloomberg violated section 17(a)(2) of the Securities Act. Without expressing its attitude towards the penalty, Bloomberg agreed to pay $5 million to settle with the SEC and voluntarily take remedial measures to improve its BVAL line of business.