Bloomberg LP, the financial news and data business relied on by much of Wall Street, has admitted misleading customers of a key securities pricing product for which it will pay a $5 million fine, the Securities and Exchange Commission announced Monday.
Bloomberg had claimed the proprietary pricing index marketed by its subsidiary, Bloomberg Finance LP, was built upon on a sophisticated algorithm that produced its figures, but in some cases the numbers were based on a single broker’s quote, the SEC said.
The service, called BVAL, provides a daily pricing index for around 2.5 million securities in numerous asset classes. Bloomberg told customers it used a complex set of data points to produce the prices. But between 2016 and 2022, the company would sometimes use a single data point to come up with a figure for very thinly-traded fixed income securities, the SEC said.
The product was used by as many as 1,300 financial institutions to make decisions on investments, the regulatory agency 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’s division of enforcement’s complex financial instruments unit. “This matter underscores that we will hold service providers, such as Bloomberg, accountable for misrepresentations that impact investors.”
A spokesman for Bloomberg didn’t immediately respond to a message seeking comment.
The SEC said that Bloomberg has agreed to pay a $5 million penalty and to make changes to its BVAL pricing practices.