Bloomberg sanctioned over bond pricing disclosures

Bloomberg Finance L.P. is being sanctioned over bond price quotes for fund managers that weren’t always as robust as promised, according to the U.S. Securities and Exchange Commission (SEC).

The SEC reached a settlement with Bloomberg that will see the firm pay a US$5-million penalty to resolve allegations that it violated disclosure requirements in connection with its paid subscription service, BVAL, which provides daily prices for fixed-income securities to financial industry firms.

“The BVAL service provides prices on a daily basis for over 2.5 million securities across all asset classes, including thinly-traded and hard-to-price fixed income securities,” the SEC noted in its order settling the case.

According to the regulator’s order, between 2016 and October 2022, Bloomberg failed to disclose to its customers that “the valuations 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.”

“The omission that valuations could be largely driven by a single data input made the statements to customers regarding valuation methodologies materially misleading,” it 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,” said Osman Nawaz, chief of the SEC enforcement division’s complex financial instruments unit, in a release.

The firm settled the allegations without admitting or denying the SEC’s findings.

In addition to the penalty, Bloomberg agreed to cease and desist from future violations. The regulator’s order also noted that Bloomberg has voluntarily undertaken improvements to its BVAL service.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.