BVAL provides daily price valuations for fixed-income securities to financial services entities. “Since at least 2016, Bloomberg has disclosed to customers that its independent valuations of fixed income securities are derived by using proprietary algorithmic methodologies,” the SEC order stated.
From at least 2016 through October 2022, Bloomberg failed to disclose to its BVAL customers that “valuations for certain thinly traded fixed-income securities could, in certain circumstances, be largely driven by a single data input, such as a broker quote,” the SEC order continued. Bloomberg knew its customers—including mutual funds, money managers, and hedge 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,” the SEC said.
“BVAL prices, which customers may use when valuing their fixed income positions and making offers and sales of securities, therefore can impact the price at which securities are or were offered or sold to investors and prospective investors or purchased from investors,” the SEC order continued. Thus, according to the order, “the omission that valuations could be largely driven by a single data input made the statements to customers regarding valuation methodologies materially misleading.”
In a statement, 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 found that Bloomberg violated section 17(a)(2) of the Securities Act. Bloomberg did not admit or denying the findings.
In determining to accept the Offer, the SEC said it considered Bloomberg’s remedial acts, “including its voluntary retention of an outside expert to examine and make enhancements to its BVAL line of business.” Additionally, in October 2022, Bloomberg published additional disclosures “with respect to its valuation methodologies, including with respect to the incorporation of single broker quotes in its valuation methodologies,” the SEC said. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.